Retail Investor Attention, Foreign Investors and Crash Risk: Evidence on Indonesian Shariah-compliant Equities

Aang Kunaifi,Muhammad Ibnu Sina Al Hanif,Geodita Woro Bramanti

doi:10.47494/pbft.2021.1.25

Aang Kunaifi, Muhammad Ibnu Sina Al Hanif + Show 1 more

Open Access

https://doi.org/10.47494/pbft.2021.1.25

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Abstract

This study analyzes how retail investor attention and foreign investors are related to stock price crash risk in shariah-compliant equities. Using quarterly data in Islamic stocks that listed on the Indonesian Capital Market during 2016- 2019, we show that retail investor attention and foreign investors are negatively associated with stock price crash risk. The retail investor attention and foreign investors diminish stock price crash risk in shariah-compliant equities. In conclusion, the benefit of active attention that retail investor pay and increasing foreign investor mitigate crash risk in shariah-compliant equities

Highlights

Stock price crash risk has been financial issue in asset pricing [1]
Our results reveal that foreign investor proxied by individual foreign investor mitigates stock price crash risk
We analyze the influence of retail investor attention and foreign investor on future stock price crash risk in Indonesia shariah-compliant equities

Summary

Introduction

Stock price crash risk has been financial issue in asset pricing [1]. The sudden movement of stock price could cause losses to investors assets. Stock price crash risk is measured by skewness of firm-specific return distribution. The Islamic stock has been evaluated and can be enter and come- out to ISSI constituent. This re-selected procedure in Islamic stock makes uncertainty to investors in shariah- compliant equities. Investors in shariah-compliant equities, especially for a faith-based investor, must be update and give more attention on their portfolio for keeping the stock return and the shariah-compliant that must be considered to make decision making on investment. Information availability and current stock price can express an market efficiency Investors gather their information to make investment decision making by using internet information, This is a monitoring mechanism that investors usually do.

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