Proceedings of the First International Conference on Economics, Business and Social Humanities, ICONEBS 2020, November 4-5, 2020, Madiun, Indonesia

Research Article

The Capital Market Reaction to the Recognition of the City of Jerusalem as the Capital City of Israel

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  • @INPROCEEDINGS{10.4108/eai.4-11-2020.2304566,
        author={H.  Gifani and L. M.  Nurafiati and B.  Wicaksono},
        title={The Capital Market Reaction to the Recognition of the City of Jerusalem as the Capital City of Israel},
        proceedings={Proceedings of the First International Conference on Economics, Business and Social Humanities, ICONEBS 2020, November 4-5, 2020, Madiun, Indonesia},
        publisher={EAI},
        proceedings_a={ICONEBS},
        year={2021},
        month={2},
        keywords={average abnormal return average trading volume activity event study},
        doi={10.4108/eai.4-11-2020.2304566}
    }
    
  • H. Gifani
    L. M. Nurafiati
    B. Wicaksono
    Year: 2021
    The Capital Market Reaction to the Recognition of the City of Jerusalem as the Capital City of Israel
    ICONEBS
    EAI
    DOI: 10.4108/eai.4-11-2020.2304566
H. Gifani1,*, L. M. Nurafiati1, B. Wicaksono1
  • 1: 1st Faculty of Economics and Business, Diponegoro University, Indonesia
*Contact email: hgifani@emailaddress.com

Abstract

Capital markets are inseparable from the environmental influence of one of the political events as a non-economic environmental influence. Capital markets efficiently react to information related to the share price because of an event. The focal point in the research centres on capital markets reacting to information and can be seen from two changes in stock prices and stock trading activities. The purpose of this research is to explain the difference of average abnormal return and average trading volume activity between before and after the recognition of the event of Jerusalem as the capital city of Israel. This research using event study with a purposive sampling method and obtained a sample of 68 stock indices. The data analyses were used statistic descriptive analyses, stationary test, cointegration test, Kolmogorov-Smirnov test for data normality test, and hypothesis testing used Paired Sample T-test for data which are normally distributed. The result of the Paired Sample T-test showed that there is an average abnormal return and there is no average trading volume activity between before and after the recognition of Jerusalem as the capital city of Israel. Information content in research affects investment because it fully reflects the information published. Affecting the share price and investors reacting to absorbing abnormal returns towards a new balance price.