The Relationship between Current COVID-19 and Indonesia Stock Market: Evidence from ARDL Model

Violita Septy Wardani; Lahuddin Lahuddin

doi:10.29259/jep.v19i1.13837

Submitted

February 22, 2021

Accepted

June 28, 2021

Published

July 3, 2021

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Abstract

This study aims to prove how COVID-19 in response to the Indonesia stock market applying an Auto-Regressive Distributed Lag (ARDL) cointegration method. This study analyzes the relationship between the natural logarithm of daily trading volume of the Indonesia Stock Exchange and the natural logarithm of daily COVID-19 confirmed cases both in the short run and the long run. Bound test and cointegration were used to analyze the data daily from 2 March 2020 until 30 November 2020. The findings result show in the short-run, Indonesia stock market is only influenced by its lag, but not in the long-run. Meanwhile COVID-19 variable proved to be not significantly affected the stock market both in short and long-run. The model is predicted to re-stabilize at least over 1.7 months later

Keywords

stock market covid-19 ARDL bound test IDX

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Wardani, V. S., & Lahuddin, L. (2021). The Relationship between Current COVID-19 and Indonesia Stock Market: Evidence from ARDL Model. Jurnal Ekonomi Pembangunan, 19(1), 101–110. https://doi.org/10.29259/jep.v19i1.13837

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References

Al-awadhi, A. M., Alsaifi, K., Al-awadhi, A., & Alhammadi, S. (2020). Death and contagious infectious diseases: Impact ofthe COVID-19 virus on stock market returns. 27(January), 6. https://doi.org/https://doi.org/10.1016/j.jbef.2020.100326
Alber, N., & Saleh, A. (2020). The Impact of Covid-19 Spread on Stock Markets?: The Case of the GCC Countries. International Business Research, 13(11), 16–24. https://doi.org/10.5539/ibr.v13n11p16
Ashraf, B. N. (2020). Stock markets’ reaction to COVID-19: cases or fatalities? Research in International Business and Finance Journal, 20, 1–18. https://doi.org/10.1016/j.ribaf.2020.101249
Bisig, T., Dupuis, A., Impagliazzo, V., & Olsen, R. B. (2018). The scale of market quakes. In Centre for Computational Finance and Economic Agents (CCFEA).
Carissa, N., & Khoirudin, R. (2020). The factors affecting the rupiah exchange rate in Indonesia. Jurnal Ekonomi Pembangunan, 18(1), 37-46. doi:https://doi.org/10.29259/jep.v18i1.9826
Chaouachi, M., & Slim, C. (2020). Current COVID-19 Impact on Saudi Stock Market: Evidence from An ARDL Model. SSRN Electronic Journal, 1, 1–12. https://doi.org/10.2139/ssrn.3636333
El-basuony, H. (2020). Effect of COVID-19 on the Arab Financial Markets Evidence from Egypt and KSA Haitham El-Basuony. Journal of Business and Management (IOSR-JBM, 22(6), 14–21. https://doi.org/10.9790/487X-2206051421
Greenwald, D. L., & Ludvigson, S. C. (2020). What Explains the COVID-19 Stock Market? (No. 27784; 27784 September).
Kartseva, M. A., & Kuznetsova, P. O. (2020). The economic consequences of the coronavirus pandemic?: which groups will suffer more in terms of loss of employment and income?? Population and Economics Journal, 4(2), 26–33. https://doi.org/10.3897/popecon.4.e53194
Le, D., Anh, T., & Gan, C. (2020). The impact of the COVID-19 lockdown on stock market performance?: evidence from Vietnam. Journal of Economic Studies, Emerald Publishing Limited, 1–16. https://doi.org/10.1108/JES-06-2020-0312
Lee, K. Y., & Chan, C. (2020). Impact of COVID-19 Evidence in Malaysian Stock Market. International Journal of Business Society, 21(2), 607–628. https://doi.org/10.33736/ijbs.3274.2020
Liu, H., Manzoor, A., Wang, C., Zhang, L., & Manzoor, Z. (2020). The COVID-19 Outbreak and Affected Countries Stock Markets Response. International Journal of Environmental Research and Public Health, 17(8), 2800. doi:10.3390/ijerph17082800
Machmuddah, Z., Utomo, S. D., Suhartono, E., & Ali, S. (2020). Stock Market Reaction to COVID-19?: Evidence in Customer Goods Sector with the Implication for Open Innovation. Journal of Open Innovation, 6(March 2020), 1–13. https://doi.org/doi:10.3390/joitmc6040099
Narayan, P. K. (2007). The saving and investment nexus for China?: evidence from cointegration tests The saving and investment nexus for China?: evidence from cointegration tests. McGill University Library, October 2012, 37–41. https://doi.org/10.1080/00036840500278103
Olusola, A. (2020). Policy lags and exchange rate dynamics in Nigeria: Any evidence?. Jurnal Ekonomi Pembangunan, 18(1), 1-12. doi:https://doi.org/10.29259/jep.v18i1.9688
Pesaran, M. H. (1997). An Autoregressive Distributed-Lag Modelling Approach to Cointegration Analysis. Cambridge University Press.
Shang, W. (2020). The outbreak of SARS-CoV-2 pneumonia calls for viral vaccines. Npj Vaccines Journal, 18, 2–4. https://doi.org/10.1038/s41541-020-0170-0
Subbotin, A., Chauveau, T., Shapovalova, K., & Models, V. (2009). Volatility Models?: from GARCH to Multi-Horizon Cascades HAL Id?: halshs-00390636 Centre d ’ Economie de la Sorbonne Documents de Travail du (No. 00390636).
Sugandi, E. A. (2020). Indonesia’s Financial Markets and Monetary Policy Dynamics Amid The COVID-19 Pandemic. In ADBI Working Paper Series (Issue 1198).
Sunarso, S., Rahayu, E. S., Taufik, T., & Kurniawan, I. (2020). Gap Analysis Sectoral Shares Index during the Covid-19 Pandemy on the Indonesia Stock Exchange. Jurnal Pengembangan Wiraswasta, 22(03), 187–196. https://doi.org/http://dx.doi.org/10.33370/jpw.v22i3.475
Trisnowati, Y., & Muditomo, A. (2021). COVID-19 and Stock Market Reaction in Indonesia. Journal of Accounting and Investment, 22(1), 23–36. https://doi.org/10.18196/jai.v22i1.8859
Widyanata, F., & Bashir, A. (2020). The Causality between Indonesian Sharia Stock Index and Market Capitalization: Evidence from Indonesia. Jurnal Ekonomi dan Studi Pembangunan, 12(1), 45-56. http://dx.doi.org/10.17977/um002v12i12020p045
World Health Organization. (2020). Coronavirus Disease 2019 Situation Report-1. 2019(March), 1–8.
Zhang, D., Hu, M., & Ji, Q. (2020). Financial markets under the global pandemic of COVID-19. Journal of Behavioral and Experimental Finance 27, 27(January), 1–5. https://doi.org/https://doi.org/10.1016/j.jbef.2020.100326
Zumbach, G. O., Dacorogna, M. M., & Olsen, R. B. (2000). Measuring shock in financial markets. International Journal of Theoretical and Applied Finance, 3(3), 347–355. https://doi.org/10.1142/S0219024900000188

References

Al-awadhi, A. M., Alsaifi, K., Al-awadhi, A., & Alhammadi, S. (2020). Death and contagious infectious diseases: Impact ofthe COVID-19 virus on stock market returns. 27(January), 6. https://doi.org/https://doi.org/10.1016/j.jbef.2020.100326

Alber, N., & Saleh, A. (2020). The Impact of Covid-19 Spread on Stock Markets?: The Case of the GCC Countries. International Business Research, 13(11), 16–24. https://doi.org/10.5539/ibr.v13n11p16

Ashraf, B. N. (2020). Stock markets’ reaction to COVID-19: cases or fatalities? Research in International Business and Finance Journal, 20, 1–18. https://doi.org/10.1016/j.ribaf.2020.101249

Bisig, T., Dupuis, A., Impagliazzo, V., & Olsen, R. B. (2018). The scale of market quakes. In Centre for Computational Finance and Economic Agents (CCFEA).

Carissa, N., & Khoirudin, R. (2020). The factors affecting the rupiah exchange rate in Indonesia. Jurnal Ekonomi Pembangunan, 18(1), 37-46. doi:https://doi.org/10.29259/jep.v18i1.9826

Chaouachi, M., & Slim, C. (2020). Current COVID-19 Impact on Saudi Stock Market: Evidence from An ARDL Model. SSRN Electronic Journal, 1, 1–12. https://doi.org/10.2139/ssrn.3636333

El-basuony, H. (2020). Effect of COVID-19 on the Arab Financial Markets Evidence from Egypt and KSA Haitham El-Basuony. Journal of Business and Management (IOSR-JBM, 22(6), 14–21. https://doi.org/10.9790/487X-2206051421

Greenwald, D. L., & Ludvigson, S. C. (2020). What Explains the COVID-19 Stock Market? (No. 27784; 27784 September).

Kartseva, M. A., & Kuznetsova, P. O. (2020). The economic consequences of the coronavirus pandemic?: which groups will suffer more in terms of loss of employment and income?? Population and Economics Journal, 4(2), 26–33. https://doi.org/10.3897/popecon.4.e53194

Le, D., Anh, T., & Gan, C. (2020). The impact of the COVID-19 lockdown on stock market performance?: evidence from Vietnam. Journal of Economic Studies, Emerald Publishing Limited, 1–16. https://doi.org/10.1108/JES-06-2020-0312

Lee, K. Y., & Chan, C. (2020). Impact of COVID-19 Evidence in Malaysian Stock Market. International Journal of Business Society, 21(2), 607–628. https://doi.org/10.33736/ijbs.3274.2020

Liu, H., Manzoor, A., Wang, C., Zhang, L., & Manzoor, Z. (2020). The COVID-19 Outbreak and Affected Countries Stock Markets Response. International Journal of Environmental Research and Public Health, 17(8), 2800. doi:10.3390/ijerph17082800

Machmuddah, Z., Utomo, S. D., Suhartono, E., & Ali, S. (2020). Stock Market Reaction to COVID-19?: Evidence in Customer Goods Sector with the Implication for Open Innovation. Journal of Open Innovation, 6(March 2020), 1–13. https://doi.org/doi:10.3390/joitmc6040099

Narayan, P. K. (2007). The saving and investment nexus for China?: evidence from cointegration tests The saving and investment nexus for China?: evidence from cointegration tests. McGill University Library, October 2012, 37–41. https://doi.org/10.1080/00036840500278103

Olusola, A. (2020). Policy lags and exchange rate dynamics in Nigeria: Any evidence?. Jurnal Ekonomi Pembangunan, 18(1), 1-12. doi:https://doi.org/10.29259/jep.v18i1.9688

Pesaran, M. H. (1997). An Autoregressive Distributed-Lag Modelling Approach to Cointegration Analysis. Cambridge University Press.

Shang, W. (2020). The outbreak of SARS-CoV-2 pneumonia calls for viral vaccines. Npj Vaccines Journal, 18, 2–4. https://doi.org/10.1038/s41541-020-0170-0

Subbotin, A., Chauveau, T., Shapovalova, K., & Models, V. (2009). Volatility Models?: from GARCH to Multi-Horizon Cascades HAL Id?: halshs-00390636 Centre d ’ Economie de la Sorbonne Documents de Travail du (No. 00390636).

Sugandi, E. A. (2020). Indonesia’s Financial Markets and Monetary Policy Dynamics Amid The COVID-19 Pandemic. In ADBI Working Paper Series (Issue 1198).

Sunarso, S., Rahayu, E. S., Taufik, T., & Kurniawan, I. (2020). Gap Analysis Sectoral Shares Index during the Covid-19 Pandemy on the Indonesia Stock Exchange. Jurnal Pengembangan Wiraswasta, 22(03), 187–196. https://doi.org/http://dx.doi.org/10.33370/jpw.v22i3.475

Trisnowati, Y., & Muditomo, A. (2021). COVID-19 and Stock Market Reaction in Indonesia. Journal of Accounting and Investment, 22(1), 23–36. https://doi.org/10.18196/jai.v22i1.8859

Widyanata, F., & Bashir, A. (2020). The Causality between Indonesian Sharia Stock Index and Market Capitalization: Evidence from Indonesia. Jurnal Ekonomi dan Studi Pembangunan, 12(1), 45-56. http://dx.doi.org/10.17977/um002v12i12020p045

World Health Organization. (2020). Coronavirus Disease 2019 Situation Report-1. 2019(March), 1–8.

Zhang, D., Hu, M., & Ji, Q. (2020). Financial markets under the global pandemic of COVID-19. Journal of Behavioral and Experimental Finance 27, 27(January), 1–5. https://doi.org/https://doi.org/10.1016/j.jbef.2020.100326

Zumbach, G. O., Dacorogna, M. M., & Olsen, R. B. (2000). Measuring shock in financial markets. International Journal of Theoretical and Applied Finance, 3(3), 347–355. https://doi.org/10.1142/S0219024900000188

The Relationship between Current COVID-19 and Indonesia Stock Market: Evidence from ARDL Model

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