Proceedings of the 1st International Conference on Sustainable Management and Innovation, ICoSMI 2020, 14-16 September 2020, Bogor, West Java, Indonesia

Research Article

The Effect of Inclusion and Exclusion Indexes Towards LQ45 and MSCI Index on the Pattern of Stock Return and Stock Trading Volume

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  • @INPROCEEDINGS{10.4108/eai.14-9-2020.2304373,
        author={Kadek Ary Widyawati and Buddi  Wibowo},
        title={The Effect of Inclusion and Exclusion Indexes Towards  LQ45 and MSCI Index on the Pattern of Stock Return and Stock Trading Volume},
        proceedings={Proceedings of the 1st International Conference on Sustainable Management and Innovation, ICoSMI 2020, 14-16 September 2020, Bogor, West Java, Indonesia},
        publisher={EAI},
        proceedings_a={ICOSMI},
        year={2021},
        month={5},
        keywords={event study index changes lq45 index msci index},
        doi={10.4108/eai.14-9-2020.2304373}
    }
    
  • Kadek Ary Widyawati
    Buddi Wibowo
    Year: 2021
    The Effect of Inclusion and Exclusion Indexes Towards LQ45 and MSCI Index on the Pattern of Stock Return and Stock Trading Volume
    ICOSMI
    EAI
    DOI: 10.4108/eai.14-9-2020.2304373
Kadek Ary Widyawati1,*, Buddi Wibowo1
  • 1: University of Indonesia
*Contact email: ary.widyawati@gmail.com

Abstract

This study examines the effect of changes in composition of the index on stock return and trading volumes at IDX used event study methodology. It is used to find out the market’s response to inclusion or exclusion stocks of the LQ45 and MSCI indexes. The final sample consisted of 24 inclusion stocks and 22 exclusion stocks in the LQ45 index; 17 inclusion stocks and 10 exclusion stocks in the MSCI index. The result showed a significant increase (decrease) in return when a stock added to (deleted form) the LQ45 and MSCI indexes. It also obtained a significant result in trading volume from inclusion and exclusion stocks in the MSCI index, yet inclusion stocks in the LQ45 index was not. This shows that the Indonesian capital market is not fully efficient market. This research supports the sustainability of investors' investment because it can be used as recommendations of making investment decisions.