THE IMPACT OF RELATED NEWS OR OFFICIAL ANNOUNCEMENT BY AUTHORITIES LINKED TO COVID-19 AND ITS MANAGING POLICIES TOWARD THE LEVEL AND VOLATILITY OF STOCK PRICE

Abstract

The Coronavirus disease (COVID-19) has had a significant impact on financial market all over the word. The study examines the impact of the emergence of pandemic COVID-19 on the stock market in Indonesia by seeing the market response to the news or announcement of the official government-related the Coronavirus disease and its handling policies. Noticeably, health news is reflected in the Case Fatality Rate. Meanwhile, the official announcements are divided into 2 (two) categories namely news that has a positive tone (good news) and the other news that has a negative tone (bad news) on the stock market. Using the daily index data Jakarta Stock Industrial Classification (JASICA since the releasing statement of the first death case of COVID-19 in Indonesia, concurrently WHO also declared the Coronavirus disease as pandemic on March, 11th 2020, until the official announcement of developing cases of Coronavirus disease has officially stopped by Indonesian authority on July, 21st 2020. Through the method of analysis of panel EGLS (Cross-section Random Effects), produced a significant impact and strong that the ratio of the number of deaths confirmed Covid-19 and the number of confirmed case reduce the level of stock prices. In contrast, it significantly increased the volatility of stock prices. Similarly, the same result is apparently shown that bad news had significantly affected at the level and volatility of the stock price. Moreover, it is also found that good news has not significantly affected toward the level and volatility of stock prices. Meanwhile, further analysis of the obtained results that the presence of foreign news significantly increased the level and volatility of stock prices. To conclude with, this research implicates on the ranging time between early appearance of Covid-19 period and absolutely needs a deep further research for the long term period.