Impact of COVID-19 on the Behaviour of Islamic and Conventional Investors: Evidence from the Indonesia Stock Market Crash 2020

Abstract

Purpose — The aim of this paper is to investigate the influence of the COVID-19 outbreak on Indonesia’s conventional and Islamic stock markets through the lens of behavioural finance in the digital age. Design/Methodology/Approach — The analysis in this paper is focused on the short-run and long-run impact of variables associated with COVID-19—such as the number of COVID-19 cases and mortality, the Google Search Volume (GSV) for the search query associated with COVID-19, and the panic index related to COVID-19—on the returns of the LQ45 Conventional Index and Jakarta Islamic Index (JII), using the Autoregressive Distributed Lag (ARDL) model. Findings — In the short run, increasing mortality and GSV significantly decreases the returns on LQ45 and JII. By contrast, the returns of LQ45 and JII are unaffected by an increase in the number of cases or the panic index. In the long run, only the panic index affects the LQ45 returns. Originality/Value — This article makes three contributions to the literature. First, it compares the COVID-19 outbreak’s impact on conventional and Islamic stock markets. Second, it discusses the short-run dynamics and long-run impact of the COVID-19 outbreak on stock returns. Third, it provides an explanation of the empirical relationship between the COVID-19 outbreak and the stock market using a behavioural finance viewpoint. Practical Implications — Digital behavioural science-based policies are needed to prevent or lessen financial market crashes during future crises. ErratumArticle classification: Erratum from: ISRA International Journal of Islamic Finance Vol. 15 No. 3 (2023)Publisher: ISRA Research Management Centre, INCEIF University Shiddiqi, F.A. & Susamto, A.A. (2023), ‘Impact of COVID-19 on the Behaviour of Islamic and Conventional Investors: Evidence from the Indonesia Stock Market Crash 2020’, ISRA International Journal of Islamic Finance, Vol. 15 No. 3, pp. 142–159. https://doi.org/10.55188/ijif.v15i3.615It has been brought to our attention that an error in the affiliation of one of the authors has been inadvertently occurred during the publication process. The affiliation of author Faris Azzam Shiddiqi on page 142 should be changed from Graduate School Yogyakarta, Universitas Gadjah Mada, Yogyakarta, Indonesia to instead read: The Graduate School, Universitas Gadjah Mada, Yogyakarta, Indonesia. ISRA Research Management Centre, INCEIF University sincerely apologises to the authors for any inconvenience caused.This change has been effected in the online version of the paper. Citation:(2023), ‘Erratum’, ISRA International Journal of Islamic Finance, Vol. 15 No. 3, https://doi.org/10.55188/ijif.v15i3.615