Composite and Investment Indicesâ€™ Performance on Shortened Trading Hours Implementation: an Event Study

Aulia Dhita Permata

doi:10.36418/syntax-literate.v7i11.12065

Aulia Dhita Permata Magister of Management, Economy and Business Faculty, University of Indonesia

DOI: https://doi.org/10.36418/syntax-literate.v7i11.12065

Keywords: Trading hours, cumulative abnormal return, event study, JII

Abstract

The Jakarta Composite Index (JCI) has reached an all-time high, and both transaction volume and the number of investors are growing significantly. The Indonesian government implemented a new policy in response to the stabilization of the economy, which impacted the capital market. IDX instituted shortened trading hours on March 30, 2020. During a pandemic, not only Indonesia but also several other exchanges employ a shortened trading hours policy. Previous research using the event study method examined market reactions during the pandemic period and discovered that return and abnormal return on specific sectors plummeted. This research intended to investigate the impact of shortened trading hours implementation on 10 investment indices using event study and a 20-day event window before and after the implementation of shortened trading hours. Using a 20-day event window before and after the policy, this study will examine the cumulative abnormal return (CAR) from each sample index and its relationship to the shortened trading hours policy. As a result, since the policy was implemented during the early stages of the pandemic, there is no correlation between shortened trading hours and CAR. Furthermore, JII is one of the indices that is growing during the event window. Adding knowledge of trading hours policy effect to achieve higher market performance during the global crisis period, so that investors know which indices to use for investment and consider employing shortened trading hours policy after pandemic.

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