Market Reactions to the Implementation of Large-Scale Social Restrictions Phase 1 in Jakarta

ABSTRACT: This study analyzes the market response to the implementation of Phase 1 of the Large-Scale Social Restrictions (known as PSBB) in Jakarta due to the Covid-19 pandemic that is hitting Indonesia. Due to the importance of Jakarta’s position as the nation’s capital and business center in Indonesia, it is estimated that the implementation of this PSBB will get a response from the market. Testing the information content of an event such as the PSBB incident generally uses an event study. The event window used in this study was 7 days using the mean-adjusted model and the 100days estimation period in calculating the abnormal return. The  sample of this research is 221 companies which are determined by purposive sampling method. The one sample t-test result shows that the hypothesis that the market reacts negatively to the implementation of Phase 1 Large Scale Social Restrictions in Jakarta is rejected, which means that the market does not react to the event.
KEYWORDS:covid-19, event study, abnormal return, mean-adjusted model, one sample t-test