Abstract
This research is an event study that evaluates the performance of large market capitalization shares using a performance model that is adjusted to risks due to the COVID-19 outbreak. The study measured the performance of large market capitalization stocks which represented each tick size on the Indonesian Stock Exchange during the COVID-19 pandemic using the Sharpe Index, the Treynor Ratio, and Jensen’s Alpha. The sample selection used a purposive sampling technique and 24 stocks were selected as samples in the study. We used the daily closing price of stocks, the Indonesia composite index, and average risk-free rate return (BI rate). By using Jensen’s Alpha, this study found that FREN was the highest beta with a value of 1.8189, indicating that the index was an effective and well-diversified stock. FREN is low priced and the highest market capitalization stock in its tick size (third tier stocks). Jensen’s Alpha is good for measuring the performance of large capitalization and low-priced stocks. There are eight stocks that always have negative values in each method of measuring stock performance, which indicates that these stocks underperformed during COVID-19.
Highlights
This research is a study of events that identify the effects of COVID-19 on the performance evaluation of large market capitalization shares using a risk-adjusted performance model consisting of the Treynor ratio, Sharpe Index, and Jensen’s Alpha
The average Indonesian bank interest rate was at a low interest rate of around 4.5% during the COVID-19 pandemic
During the 59 trading days, the Bank of Indonesia interest rate did not change and remained at the position of 0.045 or 4.5%, meaning that during the COVID-19 pandemic, the return on the interest rate was high risk. This shows that stocks during the COVID-19 pandemic were severely affected so overall stocks underperformed; different from the period before the COVID-19 pandemic, the interest rate is at the level of 5.76% or 0.0576
Summary
This research is a study of events that identify the effects of COVID-19 on the performance evaluation of large market capitalization shares using a risk-adjusted performance model consisting of the Treynor ratio, Sharpe Index, and Jensen’s Alpha. Evaluation of portfolio or stock performance is an interesting research study object. The purpose of stock performance evaluation is to ascertain whether a stock is performing better, worse, or on a par with the benchmark. Stock performance evaluation is necessary for several reasons. As investors’ knowledge of the shares they will own. In terms of compensation, stock performance information is needed to evaluate the performance of portfolio managers. The manager’s compensation is determined based on his success in managing his investment [10]
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