The Effect of Announcement as the Host of Asian Games Xviii on the Indonesian Stock Market
Posted: 6 Apr 2020
Date Written: March 4, 2020
In 2014, Indonesia was announced to host the 2018 XVIII Asian Games, the biggest sports events in Asia. This announcement is expected to have a positive impact on the country’s economy and investors as there would be thousands of spectators from both domestic and overseas. As a direct impact of the event is that Indonesia will prepare all the venue and it has to be build. This study examines whether the announcement is reacted by the capital market participants. To do so, it tests a total of 25 companies in the infrastructure, utility and transportation sector listed on the Indonesia Stock Exchange. A standard event study methodology is employed through examination of the existence of abnormal return surrounding the event. Results show that there are abnormal returns on two days before and two days after the announcement. However, overall, there are no significant abnormal returns in the period before and after the announcement. The study does not find significant difference of abnormal returns between before and after the announcement. In addition, there was no difference in trading volume activity before and after the announcement as the host of the XVIII Asian Games. In summary, the capital market participants do not regard the event to be significant issue that determines their investment decision in the capital market.
Keywords: event study, abnormal return, market reaction Asian Games
JEL Classification: G11, G12, G14
Suggested Citation: Suggested Citation