POLITICAL STABILITY AND CAPITAL MARKET SUSTAINABILITY: EVIDENCE FROM THE INDONESIAN STOCK MARKET

Abstract

This study aims to analyze the reaction of the Indonesian capital market to the August-September 2025 National Protests and Riots. The study uses a quantitative approach with an event study method on all stocks listed on the Indonesia Stock Exchange. Market reaction is measured using three indicators, namely Abnormal Return (AR), Cumulative Abnormal Return (CAR), and Trading Volume Activity (TVA). AR and CAR are calculated using a market-adjusted model, while the observation period is conducted over 11 trading days, consisting of five days before the event, one day at the event, and five days after the event. The research sample consisted of 828 companies selected using the purposive sampling method. Hypothesis testing was carried out using the Wilcoxon Signed Rank Test according to the characteristics of the data distribution. The results showed significant differences in AR, CAR, and TVA values before and after the event. These findings indicate that the Indonesian capital market responds to these socio-political events, both in the form of changes in stock returns and stock trading activities. The significance of AR and CAR indicates that investors react to information that arises during the event period, thereby affecting abnormal profits and abnormal accumulation of stock returns. Meanwhile, significant differences in TVA indicate a change in investors' trading behavior in response to increased market uncertainty. Overall, the results of the study confirm that socio-political events have information content that can influence the dynamics of the Indonesian capital market and investor behavior in making investment decisions.