Liquidity, Volatility, and Herding Behavior: A Study of the Indonesia Stock Exchange during the Covid-19 Pandemic

Zuwan Nisfu Nahar, Robiyanto Robiyanto

Abstract


This research aims to determine liquidity and volatility conditions and differences in herding behavior during the pre-pandemic, early pandemic, and the new normal period of the COVID-19 pandemic in Indonesia. This research examines the microstructure and proves herding behavior on the Indonesian Stock Exchange (IDX). This research will also look at liquidity and volatility to see market sentiment because investor behavior can be reflected in liquidity and volatility. The population used in this research is the IDX-80 index, with 48 companies as the sample. This study uses CSAD to test herding behavior because it is not sensitive to outliers. This research found that the highest market liquidity and volatility occurred during the early pandemic, and the highest herding behavior occurred during the new normal period. The market response to each event can also determine the direction of stock movements, so investors can take advantage of this period to collect shares and sell them again when prices rise. This research offers a summary of the Indonesian capital market during significant events, which can assist investors in developing investment plans that consider the course of events. Practically, this study offers actionable insights for investors by explaining how market conditions during different phases of the pandemic influence investment strategies.

Keywords


Herding; Microstructure; Liquidity; Volatility; Pandemic; Indonesia Stock Exchange

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References


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DOI: http://dx.doi.org/10.56444/mem.v40i2.5942

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