TESTING FOR SEMI-STRONG EFFICIENT MARKET HYPOTHESES AND MACROECONOMIC CONDITION IN A CONSUMPTION-DRIVEN EMERGING MARKET: EVIDENCE FROM INDONESIA

Abstract

This paper investigates the effects of the Covid-19 outbreak, macroeconomic condition, and firm-level characteristics as a proxy for semi-strong market hypotheses in the Indonesian consumer sector using a panel sample from 2014Q1-2020Q3. As recent findings suggests a significant relationship between past and recent pandemic, towards overall economic condition and also the capital markets. The dataset that is fitted to the empirical model consists of 11 variables (including control variables) using the fixed effect regression as recommended by Breusch Pagan test and Hausman test. The results of the regression suggest that the Covid-19 outbreak is considered to have an important role towards stock price with a negative relationship. Firm-level characteristics also plays a vital role in determining prices of companies listed in the consumer sector. While macroeconomic variables listed in the model yields no significance in determining stock prices of consumer sector companies. As opposed to the initial macroeconomic variables, the control variable of Exchange rate proves to have a significant impact on consumer sector company stock prices. Through this study, investors would be able to determine which variables have the highest degree of importance towards current stock price particularly on a state of economic downturn caused by the pandemic. In addition, this study would also benefit policymakers to better understand the impact of external and macroeconomic variables especially, during the covid-19 pandemic which proves to have an impact on Indonesia consumer sector stock prices.