Indonesia Stock Market Volatility: Before and After COVID-19 Pandemic

Is the pandemic affecting Indonesia stock market volatility? We are going to answer this question soon.

COVID-19 pandemic has inflicted stock market contraction around the world. Dow Jones Industrial Average and Financial Times Stock Exchange 100 index had plummeted by 23% and and 25%, respectively. It is highest drop in quarter basis since 1987.

Moving to Indonesia context, the volatility does not present in Jakarta Composite Index (JCI). Even, we can conclude that stock market in Indonesia is less volatile in the COVID-19 pandemic era, compared to before the pandemic. As we can see in scatter plot below, the range of individual stock beta is wider before than after the pandemic. Before COVID-19 pandemic, the highest beta is 6 (Pollux Properti Indonesia) and the lowest beta is -12 (SOHO Global Health). While the highest and lowest beta after the pandemic is 3.5 and -2.7, respectively.

Beta of each individual stock is used as a measurement of volatility in this context. It refers to Radoslaw Kurach (2012) research paper that states beta estimation results can explain global market portfolio fluctuations, even in the case of emerging markets.

The analysis is extracted from data covering 761 listed stocks in Jakarta Composite Index per 12 November 2021…