Bad Friday, Monday Effect and Political Issue: Application of ARCH-GARCH Model to Analyze Seasonal Pattern of Stock Return

  • Authors

    • Maria Rio Rita
    • Sugeng Wahyudi
    • Harjum Muharam
    2018-08-24
    https://doi.org/10.14419/ijet.v7i3.30.18152
  • Monday Effect, Bad Friday, Political Issue, Stock Return, ARCH-GARCH

  • Abstract

    At the end of 2016, Indonesia was shaken by a demonstration of the election of the Governor of Jakarta Capital Special Region and political issues related to religious defamation. Does this condition have an impact on stock prices and returns? The aim of this study is to test the week day pattern in IDX using LQ-45 stocks during selected observation period of August 2016-January 2017. Then a GARCH model is used to investigate the presence of week day pattern in the stock market. Therefore, the GARCH model is able to describe observed statistical characteristics of many time series of financial assets return. The test results show that there is a difference in average stock return during the trading day. The lowest and the highest return are observed on Monday and Wednesday, respectively. Meanwhile, the average negative return on Friday is not proven to significantly drive the occurrence of Monday effect. Return on Monday is influenced by the frequency of trading, not by trading volume. Is there anything to do with the psychological aspect of investors solely in assessing risk acceptance to stocks? Research agenda related to this is very relevant to do in the future.

     

     

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  • How to Cite

    Rio Rita, M., Wahyudi, S., & Muharam, H. (2018). Bad Friday, Monday Effect and Political Issue: Application of ARCH-GARCH Model to Analyze Seasonal Pattern of Stock Return. International Journal of Engineering & Technology, 7(3.30), 38-47. https://doi.org/10.14419/ijet.v7i3.30.18152

    Received date: 2018-08-24

    Accepted date: 2018-08-24

    Published date: 2018-08-24