Comparative Analysis of Stock Prices, Abnormal Return, Cumulative Abnormal Return, and Trading Volume Activity in the Indonesia Stock Exchange: An Event Study of the Russia-Ukraine War

Abstract

The Russia-Ukraine war has captured international attention and raised concerns about its potential implications on global financial markets. This study aimed to investigate the interplay between geopolitical events, market reactions within the Indonesia Stock Exchange (IDX), and the market efficiency of the IDX. The study employed event study methodology and analyzed changes in stock prices, abnormal returns, cumulative abnormal returns, and trading volume activity. The sample comprised 53 companies in the energy sector and 57 companies in the food and beverage sector listed on the IDX. The analysis focused on data from 10 days before and after three Russia-Ukraine conflict-related events, namely (1) the announcement of Russia’s invasion of Ukraine on the 24th of February 2022, (2) the announcement of an oil import embargo on Russia by the European Union on the 31st of May 2022, and (3) the announcement of the first wheat export ship’s departure from the port of Odesa on the 1st of August 2022. Both paired sample t-tests and paired sample Wilcoxon signed rank tests were conducted to assess the statistical significance of differences in the means of paired samples. The findings revealed significant differences in average stock prices before and after all three events in the energy sector. However, only events 2 and 3 displayed significant differences in average abnormal returns and cumulative abnormal returns. Moreover, events 1 and 3 exhibited significant differences in average trading volume activity. In the food and beverage sector, a significant difference in average stock prices was observed before and after event 2, while all three events presented significant differences in average abnormal returns and cumulative abnormal returns. Furthermore, event 3 showed a significant difference in average trading volume activity. These findings indicated that the IDX displayed varying reactions to different Russia-Ukraine conflict-related events. Notably, events involving multiple countries or entities exerted a greater impact on the energy and food and beverage sectors within the IDX, leading to more pronounced market reactions. Additionally, the findings suggested that the IDX exhibited a semi-strong form of market efficiency.