Islamic and Conventional Stocks’ Volatility: Evidence from the Three Waves of Covid-19 Pandemic

Abstract

This study aims to compare the performance of Islamic and conventional stocks’ performance amid a crisis. The performance is measured by analyzing the volatility of the Indonesian Sharia Stock Index (ISSI) and the Composite Stock Price Index (IHSG) IHSG during the Covid-19 pandemic. Based on the results of the different tests using the paired t-test and Wilcoxon rank test methods, it was concluded that the ISSI and IHSG experienced significant changes before and after discovering the first case of Covid-19 in Indonesia. Significant changes in both values are also found when the Delta variance spreads. Meanwhile, when the third wave occurred due to the presence of the Omicron variant, ISSI and IHSG were able to move more stable and did not experience significant shocks. Then, the estimation results of the GARCH model conclude that both Islamic stocks and conventional stocks have an immense volatility power with an identical value of 0.94 or close to 1. The volatility is also significantly influenced by the previous volatility and the squared error representing other previous events outside the model. The volatility that occurs in Islamic and conventional stocks is not much different, even though both stocks have different characters in the ratio of debt and income. Fundamental factors also cause this high volatility in the form of shocks in several macroeconomic variables, including the rupiah exchange rate, gold prices, and world oil prices. In addition, the contagion effect that occurred during the Covid-19 crisis also contributed to the spread of systemic risk in global stock indexes on stock volatility in Indonesia

The Volatility of Stock Market in Indonesia During Covid-19 Crisis : Evidence from Consumer Goods Industry

“…Dang and Nguyen (2020) also analyzed stock performance during the 2008 global financial crisis, however, this study merely uses data per company without looking at value volatility on a sectoral scale. Alghifary, Kadji, and Hafizah (2023) and using the Covid-19 crisis a crucial moment during this research. The finding of this current research will be useful for various interested parties in the capital market industry in Indonesia.…”