The Fear of COVID-19 on Indonesia Capital Market Volatility

Abstract

COVID-19 has caused a pervasive impact on human life and business operations, leading to investor fear and capital market volatility. This research aims to understand whether COVID-19 affecting Indonesia's capital market (IDX) volatility by analyzing the daily and weekly volatility from intraday stock data, the daily positive case of COVID-19 in Indonesia, and utilizing Google search volume index for some negative words related to the COVID-19 to understand the investor fear. This research adopted a simplified heterogeneous autoregressive model and covering the first case of COVID-19 in Indonesia until a day before the first vaccine was injected in Indonesia (March 2, 2020 - January 12, 2021) in all sectors on the IDX. The results showed the daily volatility, weekly volatility, and the daily positive case of COVID-19 in Indonesia can predict future volatility in almost all sectors on the IDX. We also found the global investor fear can predict future volatility in the property sector. However, we did not find evidence that investor fear in Indonesia could predict future volatility on sectoral indices on the IDX.

Keyword:capital market, COVID-19, google trends, investor fear, volatility