The Effect of Weekend Information to Monday’s Banking Index Return in Jakarta Stock Exchange

Abstract

Capital gain from stock market does not always provide abnormal return to the investor. The level of abnormal return analysis can use Efficient Market Hypothesis to measure the efficiency of the stock market by using event study. The analysis also will use behavioral finance theory to elaborate more on how investors react to the weekend period news and arbitrage theory to know if there is an arbitrage profit that can be captured. The information on the weekend holidays should reflect in the Monday price if the market is efficient. The research will use banking index as the main study because banking index is sensitive to the news especially from financial crisis contagious. The weekend period news will be grouped into the regional and the internal Indonesia news. The results indicate that the banking index of Jakarta Stock Exchange supports the semi-strong efficient market hypothesis in the presence of Indonesia economic, fiscal policy and monetary policy news. The return of the banking index and Jakarta Composite Index on Monday may face overconfidence and anchoring and adjustment bias that can distort the price on Monday. The research shows that banking index underperforms the Jakarta Composite Index. This shows that the existence of Monday Effect anomaly is rejected. The Jakarta Composite Index is affected by the availability of the news from Japan, world news and Indonesia economy news. News that may affect each index can be specified into the exposure of the industry.