The impact of PSBB policy announcement during the COVID-19 pandemic on abnormal stock returns in various economic sectors in Indonesia

Abstract

This study aims to examine the impact of PSBB policy announcement during the COVID-19 pandemic on abnormal stock returns in Indonesia. Pembatasan Sosial Berskala Besar (PSBB) is a lockdown-like policy applied by Indonesian government. In particular, an event study analysis is conducted to estimate abnormal returns of the 90 selected stocks grouped by economic sectors. The results of this study reveal that various sectors have significant abnormal returns at a certain time. The difference in abnormal returns before and after the announcement are significantly occurred due to changes in investor behavior in certain sectors. In addition, there are sectors that show significant cumulative abnormal returns with negative and positive values during the event window period. Hence this study can be a consideration for the parties concerning risk mitigation strategies in investing.