Does Announcement on Public Activity Restrictions Affect Stock Prices? Evidence from Indonesia

Abstract

The new variant of Covid - 19, delta variant, has affected many countries. Indonesia has recorded rapid additional cases day by day since the second half of June 2021. The record shows that there are around 4,000 cases daily at the beginning of June 2021, an increase to more than 20,000 at the end of June. In order to avoid further spreading of the virus, the government announced a restriction for public activity, scheduled for July 3rd to July 20th, 2021, which then extended to August 9th, 2021. This important announcement was expecting market reaction just like the first announcement of Covid-19 entrance to Indonesia in March 2020, when many stock prices dropped rapidly. This paper aims to study the effect of the restriction and the announcement of several pieces of information such as daily additional cases, daily additional deaths, and positivity rate to the stock prices in Indonesia Stock Market during public activity restriction from July 3rd to September 13th, 2021 before the re-extension of the restriction. There are 724 unique firms listed in IDX, with 25 trading days observed. Data of the announcement were taken from kawalcovid19.id daily announcement, and stock prices data were taken from stock summary open access data from IDX website and yahoo finance, resulting in 18,824 firm-day observations. Stata was used to process the regression while controlling for the firm and industry. A robustness test was done to see the effect of the announcement on each industry. This paper finds that daily announcement does affect stock prices during public activity restriction in the announcement of additional deaths and positivity rate announcement. Empirically, higher death and higher positivity rates were reported to drop the stock prices in Indonesia.

Keywords: stock prices, public activity restriction