Indonesian Stock Market Efficiency Analysis Based on Abnormal Return and Trading Volume: Tapering Off Policy Evaluation

Federal Reserve made an announcement in tapering off their Quantitative Easing (QE) monetary policy on May 22, 2013. This policy made foreign investors withdraw their capitals from Emerging Markets. Indonesia is one of Emerging Market Countries that got their foreign capitals from Quantitative Easing policies. In turn, that announcement made investors in Emerging Market Economies (EMEs) lose their tolerance to risk. The purpose of this research is to analyze tapering announcement effect to return and trading volume for nine sectors of Indonesian Stock Market (IDX). We used event study methodology in conducting this research with data provided from daily price and volume consisted of three companies each sector. We found that tapering announcement give significant positive return before and significant negative return after the announcement. However, tapering announcement did not show significant return before and after event date at each sector. It shows that trading volume activity made a significant difference in two sectors (Finance and Agriculture). This research limited by only using three companies from nine sectors chosen by their market caps with no corporate event on event window. The result implicated that there is negative sentiment because of this announcement but the fact is there is no significant difference in return. Also, because of the event, there is a significant increase in trading volume at two sectors that implicate that those sectors had the biggest negative sentiment from the investors.