OVERREACTION ANALYSIS OF INDONESIAN CAPITAL MARKET INVESTORS AFTER THE ANNOUNCEMENT OF THE FIRST COVID-19 CASE IN INDONESIA

Abstract

This study aims to obtain empirical evidence regarding investor overreaction in winner stocks and investor overreaction in loser stocks after the announcement of the first COVID-19 case in Indonesia. Overreaction analysis was carried out in 11 IDX-IC stock sectors. Winner shares and loser shares were selected from one third stock with the highest CAR value and one third stock with the lowest CAR value for each sector. The analysis technique used is the Dependent Paired Sample t-Test by comparing the AAR values of winner or loser stocks on the first 30 trading days after the announcement of the COVID-19 case with the AAR of winner or loser stocks on the next 30 trading days. The results showed that there was investor overreaction after the announcement of the first COVID-19 case in Indonesia, both in loser stocks and in winner stocks. Overreaction in loser stocks occurred in the infrastructure sector, the financial sector and the technology sector. Overreaction in winner stocks occurred in the consumer non-cyclical sector, the energy sector, the basic materials sector, the consumer cyclical sector and the property & real estate sector.

Keywords

• overreaction hypothesis
• efficient market hypothesis
• public service