IMPACT OF COVID-19 ON ISLAMIC AND CONVENTIONAL STOCKS IN INDONESIA: A WAVELET-BASED STUDY
Abstract
The recent literature shows that COVID-19 has impacted stock markets around the world in many ways. In this paper, we examine the reaction of the Indonesian stock market to COVID-19. We apply the continuous wavelet coherence methodology to daily COVID-19 related deaths and daily conventional and Islamic stock indices in
Indonesia. We find that COVID-19 negatively impacts the returns of both indices and enhances their volatility. We find the Islamic stock index to be more volatile as compared to its conventional counterpart during the COVID-19 outbreak.
Downloads
References
Al-Awadhi, A.M., Al-Saifi, K., Al-Awadhi, A., & Alhamadi, S. (2020). Death and Contagious Infectious Diseases: Impact of the COVID-19 Virus on Stock Market Returns. Journal of Behavioral and Experimental Finance, 100326.
Albulescu, C. (2020). Coronavirus and Financial Volatility: 40 Days of Fasting and Fear. arXiv preprint arXiv:2003.04005.
Ali, M., Alam, N., & Rizvi, S.A.R. (2020). Coronavirus (COVID-19)–An Epidemic or Pandemic for Financial Markets. Journal of Behavioral and Experimental Finance, 100341.
Daniel, K., Hirshleifer, D., & Subrahmanyam, A. (1998). Investor Psychology and Security Market Under‐and Overreactions. the Journal of Finance, 53, 1839-1885.
Devpura, N. (2020). Can Oil Prices Predict Japanese Yen? Asian Economics Letters,1. https://doi.org/10.46557/001c.17964
Diela, T. (2017). Committee for Shariah Finance to Make Indonesia Global Hub for Islamic Economy. The Jarkarta Globe. Retrieved from http://jakartaglobe.id/business/committee-sharia-finance-make-indonesia-global-hub-islamiceconomy/
Djalante, R., Nurhidayah, L., Van Minh, H., Phuong, N.T.N., Mahendradhata, Y., Trias, A., Lassa, J., and Miller, M.A. (2020). COVID-19 and ASEAN Responses: Comparative Policy Analysis. Progress in Disaster Science, 8, 100129.
Donadelli, M. (2015). Google Search-Based Metrics, Policy-Related Uncertainty and Macroeconomic Conditions. Applied Economics Letters, 22, 801-807.
Engelberg, J.E., & Parsons, C.A. (2011). The Causal Impact of Media in Financial Markets. the Journal of Finance, 66, 67-97.
Ertuğrul, H.M., Güngör, B.O., & Soytaş, U. (2020). The Effect of the COVID-19 Outbreak on the Turkish Diesel Consumption Volatility Dynamics. Energy Research Letters, 1, 17496.
Goodell, J.W., & Goutte, S. (2020). Co-movement of COVID-19 and Bitcoin: Evidence from Wavelet Coherence Analysis. Finance Research Letters, 101625.
Grinsted, A., Moore, J.C., & Jevrejeva, S. (2004). Application of the Cross Wavelet Transform and Wavelet Coherence to Geophysical Time Series.
Haroon, O., & Rizvi, S.A.R. (2020). Flatten the Curve and Stock Market Liquidity– An Inquiry into Emerging Economies. Emerging Markets Finance and Trade, 56, 2151-2161.
He, P., Sun, Y., Zhang, Y., & Li, T. (2020). COVID–19’s Impact on Stock Prices Across Different Sectors—An Event Study Based on the Chinese Stock Market. Emerging Markets Finance and Trade, 56, 2198-2212.
Hong, H., & Stein, J.C. (1999). A Unified Theory of Underreaction, Momentum Trading, and Overreaction in Asset Markets. the Journal of Finance, 54, 2143-2184.
Hong, H., Torous, W., & Valkanov, R. (2007). Do Industries Lead Stock Markets? Journal of Financial Economics, 83, 367-396.
Huang, W., & Zheng, Y. (2020). COVID-19: Structural Changes in the Relationship Between Investor Sentiment and Crude Oil Futures Price. Energy Research Letters, 1, 13685.
Iyke, B.N. (2020a). COVID-19: The Reaction of US Oil and Gas Producers to the Pandemic. Energy Research Letters, 1, 13912. https://doi.org/10.46557/001c.13912.
Iyke, B.N. (2020b). The Disease Outbreak Channel of Exchange Rate Return Predictability: Evidence from COVID-19, Emerging Markets Finance and Trade, 56, 2277-2297. https://doi.org/10.1080/1540496X.2020.1784718.
Iyke, B.N. (2020c). Economic Policy Uncertainty in Times of COVID-19 Pandemic. Asian Economics Letters, 1. https://doi.org/10.46557/001c.17665.
Iyke, B.N., & Ho, S.Y. (2020). Consumption and Exchange Rate Uncertainty: Evidence from Selected Asian Countries. The World Economy, 43, 2437-2462. https://doi.org/10.1111/twec.12900.
Iyke, B.N. & Ho, S.Y. (2021). Investor Attention on COVID-19 and African Stock Returns. MethodsX, 8, 101195. https://doi.org/10.1016/j.mex.2020.101195.
Juhro, S M., Narayan, P.K., Iyke, B.N., & Trisnanto, B. (2020). Is There a Role for Islamic Finance and R&D in Endogenous Growth Models in the Case of Indonesia? Pacific-Basin Finance Journal, 62, 101297. https://doi.org/10.1016/j.pacfin.2020.101297
Narayan, P.K. (2020a). Oil Price News and COVID-19—Is there any Connection?. Energy Research Letters, 1, 13176. https://doi.org/10.46557/001c.13176
Narayan, P.K. (2020b). Has COVID-19 Changed Exchange Rate Resistance to Shocks? Asian Economics Letters, 1. https://doi.org/10.46557/001c.17389
Narayan, P.K. (2020c). Did Bubble Activity Intensify During COVID-19? Asian Economics Letters, 1. https://doi.org/10.46557/001c.17654
Peress, J. (2014). The Media and the Diffusion of Information in Financial Markets: Evidence From Newspaper Strikes. the Journal of Finance, 69, 2007-2043.
Phan, D.H.B., & Narayan, P.K. (2020). Country Responses and the Reaction of the Stock Market To COVID-19—A Preliminary Exposition. Emerging Markets Finance and Trade, 56, 2138-2150.
Prabheesh, K.P., Padhan, R., & Garg, B. (2020). COVID-19 and the Oil Price–Stock Market Nexus: Evidence from Net Oil-Importing Countries. Energy Research Letters, 1, 13745.
Rattanasevee, P. (2014). Leadership in ASEAN: The Role of Indonesia Reconsidered. Asian Journal of Political Science, 22, 113-127.
Rizvi, S.A.R., Arshad, S., & Alam, N. (2018). A Tripartite Inquiry into Volatility- Efficiency-Integration Nexus-Case of Emerging Markets. Emerging Markets Review, 34, 143-161.
Rua, A., & Nunes, L.C. (2009). International Comovement of Stock Market Returns: A Wavelet Analysis. Journal of Empirical Finance, 16, 632-639.
Sharma, S.S. (2020). A Note on the Asian Market Volatility During the COVID-19 Pandemic. Asian Economics Letters, 1. https://doi.org/10.46557/001c.17661
Torrence, C., & Compo, G.P. (1998). A Practical Guide to Wavelet Analysis. Bulletin of the American Meteorological society, 79, 61-78.
Torrence, C., & Webster, P.J. (1999). Interdecadal Changes in the ENSO–Monsoon System. Journal of climate, 12, 2679-2690.
Vidya, C.T., & Prabheesh, K.P. (2020). Implications of COVID-19 Pandemic on the Global Trade Networks. Emerging Markets Finance and Trade, 56, 2408-2421.
Yu, J.-S., & Hassan, M.K. (2008). Global and Regional Integration of the Middle East and North African (MENA) Stock Markets. The Quarterly Review of Economics and Finance, 48, 482-504.
Copyright (c) 2021 Buletin Ekonomi Moneter dan Perbankan
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Buletin Ekonomi Moneter dan Perbankan / Bulletin of Monetary Economics and Banking is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
