Stock Market Reaction to the Announcement of the 2015 Indonesian Government Economic Policy Package in the Indonesia Stock Exchange
Abstract
This research examines the stock-market reaction to the announcement of the Indonesian government’s economic policy packages, which consist of four volumes in the Indonesia Stock Market. Variables used in this research are average abnormal return (AAR) and cumulative average abnormal return (CAAR) that are then tested using a statistical test one-sample t-test. In this research, economic policy package volume 1 contains three important policies – improving industry competitiveness, accelerating national strategic projects and encouraging investment in property sector. Economic policy package volume 2 focuses more on simplifying the investment licensing and securing the export foreign exchange. Economic policy package volume 3 is mainly focused on providing incentives for business players, and economic policy package volume 4 regulates the labor payroll system in Indonesia. This research uses the event study model which with different study periods. The results indicate that the market reacts positively during the announcement of the economic policy package volume 1 and 2, but reacts otherwise during the announcement of the economic policy package volume 3 and 4.
Keywords: government’s economic policy package, AAR, CAAR, stock market reaction
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