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The impact of mobility restrictions, sentiment, and deaths on the liquidity and volatility of LQ 45 Index: a comparative study between the first and the second wave of the COVID-19 pandemic

Author

Listed:
  • Sendy Watazawwadu'Ilmi
  • Dewi Hanggraeni

Abstract

The COVID-19 pandemic has affected Indonesia more significantly than the last crisis. It hit and caused Indonesia to have the highest accumulation rate of confirmed cases in Southeast Asia. This study aims to analyse the impact of the COVID-19 pandemic on the Indonesian stock market during the first and second waves. We mainly used panel data regression on daily market returns and defined the liquidity and volatility dynamic to understand the various dimension of the pandemic. We found a relationship between pandemics and the Indonesian stock market during the first and second waves of the pandemic. Our results suggest that increasing mobility restriction implementation would increase market illiquidity and volatility. In parallel, the rise of negative sentiment and fatality rate caused by COVID-19 provides liquidity and stability failure. This study suggests that investors should closely follow the development of country policies to make decisions related to investing in financial markets.

Suggested Citation

  • Sendy Watazawwadu'Ilmi & Dewi Hanggraeni, 2024. "The impact of mobility restrictions, sentiment, and deaths on the liquidity and volatility of LQ 45 Index: a comparative study between the first and the second wave of the COVID-19 pandemic," Global Business and Economics Review, Inderscience Enterprises Ltd, vol. 31(2), pages 155-180.
    • Handle: RePEc:ids:gbusec:v:31:y:2024:i:2:p:155-180
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