Analysis of The Black Swan Event in The Covid-19 Pandemic Era on The Composite Stock Price Index (IHSG)
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Asian Journal of Research in Business and Management
e-ISSN: 2682-8510 | Vol. 3, No. 2, 50-58, 2021
http://myjms.mohe.gov.my/index.php/ajrbm
Analysis of The Black Swan Event in The Covid-19 Pandemic Era
on The Composite Stock Price Index (IHSG)
Fia Dialysa1,2*
1
Management, Ekuitas Business School, Bandung, Indonesia
2
Doctoral Student in Economics of Parahyangan Catholic University, Bandung, Indonesia
*Corresponding Author: fdialysa@gmail.com
Accepted: 15 June 2021 | Published: 1 July 2021
__________________________________________________________________________________________
Abstract: The existence of the Corona Virus (Covid-19) pandemic event not only poses a threat
to health but also economic growth in a country. Corona Virus Disease 2019 (Covid-19) has
significantly changed the world economy. The impact of the spread of the Corona Virus (Covid-
19) cannot be calculated with certainty. However, the economic system slowdown has already
been felt, especially in the industrial, tourism, trade, transportation, and investment sectors. It
cannot be avoided as well as Indonesia, the increase in positive cases of Corona has brought
effects to the stock market (iNews.id). As a result, the Composite Stock Price Index (IHSG)
experienced a significant decline. The phenomenon of rare events that have a big impact, are
difficult to predict, and are beyond the usual predictions is called the Black Swan Event or the
Theory of Events of the Black Swan. (Kiky, 2020). The purpose of this study is to determine the
events, influencing factors, impacts, and solutions of the Black Swan Event in the Covid-19
Pandemic Era on the Composite Stock Price Index (IHSG) in Indonesia. The targeted outputs
are international journals. The results showed, 1) The Black Swan incident occurred in early
January 2020, where the stock and bond markets experienced a very significant decline.
2)External factors, namely the Covid-19 Pandemic, are the most dominant things affecting the
JCI in Indonesia. 3)The impact is that the increasing number of Covid-19 patients, the worse
the JCI and the exchange rate will also be worse 4) Solutions that must be done are 4 focus
and 5R.
Keywords: Black Swan Event, Covid-19 Pandemic, Composite Stock Price Index (IHSG)
___________________________________________________________________________
1. Introduction
The Covid-19 pandemic first emerged from Wuhan City, China at the end of December 2019,
is a situation where the Covid-19 virus outbreak has emerged and has not ended yet. This virus
outbreak caused respiratory problems in humans which resulted in the city of Wuhan, where
the outbreak began, having to decide on a lockdown to inhibit the spread of the virus. The
existence of the Corona Virus (Covid-19) pandemic event not only poses a threat to health but
also economic growth in a country. Corona Virus Disease 2019 (Covid-19) has significantly
changed the world economy.
50
Copyright © 2021 ASIAN SCHOLARS NETWORK - All rights reserved
Asian Journal of Research in Business and Management
e-ISSN: 2682-8510 | Vol. 3, No. 2, 50-58, 2021
http://myjms.mohe.gov.my/index.php/ajrbm
Figure 1: Indonesia's Economic Growth
Based on Figure 1, from 2013 to 2014 there was a 9.89% decline in growth. The next decline,
in 2014 amounted to 2.59%, in 2015 at 3.07%. In 2016 it rose 0.79% until the following year
there was an increase of 1.97%, and 1.35%. In 2019, economic growth has decreased again by
5.88% until 2020.
The impact of the spread of the Corona Virus (Covid-19) cannot be calculated with certainty.
However, the economic system has slowed down, especially in the industrial, tourism, trade,
transportation, and investment sectors. It cannot be avoided as well as Indonesia, the increase
in positive cases of Corona has brought effects to the stock market (iNews.id). As a result, the
Composite Stock Price Index (IHSG) experienced a significant decline.
Figure 2: Development of the Composite Stock Price Index (IHSG) 2020
In figure 2, the JCI at the beginning of 2020 was at 6,300 and fluctuated never falling below
6,000 until the end of January 2020. However, the direction of the index movement changed
drastically in early February 2020. The decline in the JCI value even continued until March
2020. The JCI was Initially it was at 6,000, losing almost 50% of that value when it was in
early March 2020. Until August 7, 2020, JCI was still closed in the red zone with minus
18.34%. The drop in this index that occurred in March 2020 which was almost 50%, is an
extraordinary event. (sindonews.com).
51
Copyright © 2021 ASIAN SCHOLARS NETWORK - All rights reservedAsian Journal of Research in Business and Management
e-ISSN: 2682-8510 | Vol. 3, No. 2, 50-58, 2021
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IHSG
6,500
6,000
5,500
5,000
IHSG
4,000
3,500
3,000
1/2/20 2/2/20 3/2/20
12/2/19
Figure 3: COMPOSITE STOCK PRICE INDEX (IHSG)
Figure 3 shows a downtrend that occurred almost 50% from the beginning of December 2019.
This situation occurred on March 2, 2020, when the government first announced a lockdown
to the public.
The phenomenon of rare events that have a big impact, are difficult to predict, and are beyond
the usual predictions is called the Black Swan Event or the Black Swan Event Theory. (Kiky,
2020). The problems to be studied:
1) How did the Black Swan Event in the Covid-19 Pandemic Era on the Composite Stock
Price Index (IHSG) in Indonesia occur?
2) What are the factors that influence the occurrence of the Black Swan Event in the
Covid-19 Pandemic Era on the Composite Stock Price Index (IHSG) in Indonesia?
3) What is the impact of the Black Swan Event in the Covid-19 Pandemic Era on the
Composite Stock Price Index (IHSG) in Indonesia?
4) What is the solution if the Black Swan Event occurs again in the future?
The objectives of this research are:
1) To find out about the Black Swan Event in the Covid-19 Pandemic Era that occurred
on the Composite Stock Price Index (IHSG) in Indonesia.
2) To find out the factors that influence the occurrence of the Black Swan Event in the
Covid-19 Pandemic Era on the Composite Stock Price Index (IHSG) in Indonesia.
3) To find out the impact of the Black Swan Event in the Covid-19 Pandemic Era on the
Composite Stock Price Index (IHSG) in Indonesia.
4) To find out the solution that must be done if the Black Swan Event occurs again in the
future.
The urgency of this research is:
1) For investors, it can be input in making decisions to get the expected results.
2) For companies, it can be input and information so that it is sustainable.
52
Copyright © 2021 ASIAN SCHOLARS NETWORK - All rights reservedAsian Journal of Research in Business and Management
e-ISSN: 2682-8510 | Vol. 3, No. 2, 50-58, 2021
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3) For the Government, this can be used as material for consideration /input in making
policies.
4) For the community, it can be taken into consideration in investing in shares.
2. Literature Review
In this study, the theory used is as follows:
1) Grand Theory: Management
2) Middle Range Theory: Financial Management, Signaling Theory, Investment Theory
and Black Swan Theory
3) Applied Theory: Composite Stock Price Index (IHSG), The Covid-19 pandemic.
4) Grand Theory is the basis for the birth of other theories at various levels, called macro
because these theories are at the macro level. Middle Range Theory is a theory that is
at the mezzo/middle level where the focus of the study is macro and micro, while
Applied Theory is a theory that is at the micro-level and is ready to be applied in
conceptualization. (Arikunto, 2010).
1) Grand Theory: Management
Management is a process of working together for two or more people to achieve
organizational goals by planning, organizing, directing, coordinating, and controlling to
achieve organizational goals effectively and efficiently using human resources and other
resources. (Effendi, 2015: 5). Management has specific goals and is intangible. The attempt
is to achieve specific results; usually expressed in the form of goals. The efforts of the group
support the achievement of that specific goal. Management can be stated as intangible,
because it cannot be seen, but the results can be felt, namely sufficient work output, personal
satisfaction, better products, and services. (Terry, 2013: 10).
2) Middle Range Theory
a. Financial management is an amalgamation of the arts that discusses, studies, and analyzes
the role of a financial manager in using all company resources to raise funds, manage
funds, and share funds with shares and business sustainability for companies. (Fahmi,
2015: 2). The purpose of financial management according to Harmono (2016: 8) is to
maximize shareholder wealth, which means increasing company value, which is a
measure of objective value by the public and an orientation to the company's survival.
b. Signaling Theory. Michael Spanse was the originator of this theory in 1973, showing that
investments made by companies provide a signal, especially to investors creditors, that
the company will grow well in the future, namely by increasing stock prices as an
indicator of company value. This theory emphasizes the importance of the information
issued by the company on investment decisions outside the company. Signaling theory
argues that the existence of information asymmetry can be taken as an excuse for
companies that use financial information to transmit signals. The information published
is an announcement that will give a signal to investors in investment decisions. Through
financial information, management will signal investors about the company's prospects
and management will take investment actions which it deems necessary to support the
company's value as proxied by a price. shares are high and of course, will provide benefits
to shareholders as investors. (Aditya, 2012).
c. Investment Theory. According to Tandelilin (2010) there are three main reasons why
investment is needed, namely the existence of future needs that have not been able to be
fulfilled, the desire to add to the value of assets owned and the existence of inflation.
Investment can be defined as a form of fund management to provide benefits by placing
53
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e-ISSN: 2682-8510 | Vol. 3, No. 2, 50-58, 2021
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these funds in an allocation which is expected to provide additional compounding
benefits.
(Fahmi et al, 2011: 4).
According to Tandelilin (2010:8) states that there are several reasons for someone to invest,
including the following: 1)To get a more decent life in the future. 2)Reducing inflationary
pressure. 3)The urge to save taxes.
The investment objectives are (Fahmi et al, 2011:4): a. Creating continuity in the investment.
b. Creation of maximum profit or expected profit (actual profit) c. The creation of prosperity
for shareholders d. Take part in contributing to the development of the nation.
d. Black Swan Theory. Black Swan Theory is a theory about unexpected events that have a
big impact on human life. This theory was first introduced by Nassim Nicholas Talleb in
his book "The Black Swan" in 2007. The word Black Swan originated in 1697 where
previously humans believed all geese were white. Until one day, explorers from the
Netherlands saw a black swan for the first time in Western Australia. Since then, the
word black swan has been used to describe events that seemed unlikely. (investor. id)
This theory explains (Kiky, 2020): 1)The disproportionate role of important, unpredictable,
and rare events that are beyond normal expectations in history, science, finance, and
technology. 2)Non-computing the probability of a consequential rare event using the scientific
method (due to the nature of the small probability). 3)The psychological bias that blinds people,
both individually and collectively, of uncertainty and the great role of rare events in historical
affairs.
The Black Swan theory can be applied if there are the following characteristics (Kiky, 2020):
1)There are random events that move not following a pattern 2)Have a big effect or influence
in the life of mankind 3)Appears unexpectedly, suddenly, and unplanned 4)After appearing,
humans can explain by hindsight 5)Happening from things that are impossible to happen. Apart
from the coronavirus pandemic, the existence of other "Black Swan" for example the terrorist
attacks on September 11, 2001, and the tsunami in the Pacific in December 2004. Ben
Bernanke, Former Federal Reserve Chairman, stated that the existence of "Black Swan" at this
time, "This is a very different animal from the Great Depression "(CNBC, March 2020).
3. Applied Theory.
a. Composite Stock Price Index (JCI) IHSG is a value used to measure the performance of
shares listed on a stock exchange (Sri, 2012). The JCI describes a series of historical
information regarding the movement of the combined share price of all shares up to a
certain date. The JCI index calculation uses all listed companies as components. The
Indonesia Stock Exchange (IDX) is an institution that has the right to control the IHSG
to describe a fair market situation, also has the right to exclude or not include one or
several listed companies from the IHSG calculation. The index calculation explains the
movement of stock prices on the stock exchange through the auction trading system. The
share price used in calculating the JCI is the stock price in the regular market which is
based on the price based on the auction system. The JCI calculation is carried out every
day, namely after the close of trading every day.
According to Zulfikar (2016), factors that affect stock prices can come from internal and
external factors of the company, factors that affect stock price movements, or the stock price
54
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e-ISSN: 2682-8510 | Vol. 3, No. 2, 50-58, 2021
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index, namely: a. Internal factors - Funding announcements, such as announcements related to
equity and debt. - Announcements of the management board of directors, such as changes and
changes in directors, management, and organizational structure. - Diversification taking
announcements such as reports on mergers, equity investments, take over reports by acquirers,
and on acquisitions. - Investment announcements, plant expansion, research development, and
other business closings. b. External Factors - Announcements from the government such as
changes in savings and deposit interest rates, foreign exchange rates, inflation. - Securities
industry announcements, such as annual meeting reports, insider trading, trading volume or
price, trading restrictions, or delays. - Domestic political turmoil and exchange rate fluctuations
- Various issues both domestic and foreign.
b. The Covid-19 pandemic. According to WHO, a pandemic is the scale of the spread of
disease that occurs globally throughout the world. An outbreak as a pandemic means that
WHO is giving an alarm to the governments of all countries of the world to increase
preparedness to prevent and manage outbreaks. This is because when a pandemic is
declared, it means that there is a possibility of community spread occurring. In
determining an outbreak as a pandemic, WHO has no threshold for the number of deaths
or infections or the number of countries affected. This type 19 coronavirus appeared in
Wuhan, China. The virus is then transmitted between humans through droplets of body
respiration fluid through hands or solid surfaces. Until finally, this new type of
coronavirus was also called Covid-19. Covid-19 stands for Corona (CO), Virus (VI)
Disease (D), and 2019 (19), which is where the Covid-19 coronavirus first appeared in
2019. The World Health Organization (WHO) finally established Covid -19 to mention
the coronavirus that is endemic around the world. (www.cnbcindonesia.com)
3. Discussion and Conclusion
"Black Swan" was first introduced by Nassim Nicholas Talleb in 2007. In addition to the
coronavirus pandemic, the existence of other "Black Swan" is the terrorist attack on September
11, 2001, in America, as well as the tsunami in the Pacific in December 2004. (CNBC, March
2020). Black Swan event can occur if: 1) The event was a surprise (to the observer). 2)The
event had a profound effect. 3)After the first recorded event, it was rationalized looking back,
as if it were to be expected; This means that relevant data is available but not taken into account
in the risk mitigation program. The same is true of personal perceptions by individuals. (Talleb,
2007).
The Black Swan Event on the Composite Stock Price Index (IHSG) took place in early January
2020, when the stock and bond markets experienced a very significant decline. Market
optimism was suddenly interrupted by the Coronavirus outbreak which triggered foreign
investment managers to shift their portfolios from the stock market to “haven” instruments, as
well as forced sale of several shares on the domestic market. So that the JCI is at 5,940 which
is below the psychological level of 6,000. Where the previous year closed at the level of
6,299.5. (investor.id). The black swan phenomenon can be analyzed by looking at the daily and
weekly return data from the JCI. The following is the daily return for the JCI from December
2019 to March 2020:
55
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e-ISSN: 2682-8510 | Vol. 3, No. 2, 50-58, 2021
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Daily Return IHSG
4.000%
2.000%
0.000% 1 6 11162126313641465156616671
-2.000% Daily Return IHSG
-4.000%
-6.000%
-8.000%
Figure 6: JCI Daily Return from December 2019 - March 2020
The daily movement of the JCI shows very high volatility at the end of the observation period
(March 2020). The fluctuation of changes (return) in the JCI increased to reach 4-6% per day
in that month.
Weekly Return IHSG
4.00%
2.00%
0.00%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
-2.00%
-4.00% Weekly Return IHSG
-6.00%
-8.00%
-10.00%
-12.00%
Figure 7: JCI Weekly Return from December 2019 - March 2020 Source: Kiky (2020)
Based on the JCI weekly return data, it can be seen that the JCI movement from early March
to March 20, 2020, showed a decline of up to 22%. Based on the descriptive data, the most
drastic downward trend occurred in March 2020. In the capital market industry, if there is a
Black Swan Event, this moment can be used for several things, namely realizing profits if there
is a rapid increase in the price of investment instruments (profit taking) or investing in the event
of a price correction (time to buy). (wartaekonomi.co.id).
According to Zulfikar (2016), factors that affect stock prices can come from internal and
external factors of the company. Based on the factors that influence the JCI, the authors argue
that external factors on foreign issues are very dominant, namely the Covid-19 Pandemic. The
virus that originated in the Chinese city of Wuhan has spread throughout the world and is still
ongoing. Though China is the largest supply chain for the trade sector. This pandemic caused
a trade slowdown caused by massive restrictions on travel to other cities and countries in the
56
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e-ISSN: 2682-8510 | Vol. 3, No. 2, 50-58, 2021
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world. Travel restrictions and the closure of some transportations have disrupted production,
distribution, and consumption activities. (kompasiana.com). These circumstances force every
company to become more resilient, including changes in extreme weather, changes in political
upheaval, cyber-attacks, or subsequent outbreaks of disease. In addition, central bank policies
in developed countries, particularly the Fed, have again pursued monetary easing, either
through lowering interest rates or liquidity flows or quantitative easing (QE).
The impacts of the Black Swan Event in the Covid-19 Pandemic Era on the Composite Stock
Price Index (IHSG) in Indonesia are: 1) The more Covid-19 patients get, the worse the JCI and
Exchange Rate will be. So far, data from research is still very little, but indications have been
found of the effects of Covid-19 on the Indonesian financial sector (capital market). (Kiky,
2020). 2) Investors who take advantage of the opportunity will sell their investments before
experiencing a drastic decline in value when the government announces Covid-19. 3) The
capital market has lost nearly 50% of its value. 4) The global economy is experiencing difficult
times and is likely to experience recession and economic slowdown. (kompasiana.com)
Solutions that must be done if the Black Swan Event occurs again at a later date. If the Black
Swan phenomenon occurs again at a later date, several things can be anticipated by the
company. A strong company must carry out 4 focuses to prevent the Black Swan phenomenon,
these steps include: 1)building strong, trusted, and reliable relationships with customers
2)becoming the company of choice that can easily recruit and retain the best talent 3)protect
revenue and reputation during the crisis 4)must achieve resilience, which must involve every
part of the organization from the chief executive, business line leaders to technology leaders.
(Balaouras, 2020 in entrepreneur.bisnis.com).
According to McKinsey & Company (March 2020 in kompasiana.com), there are five stages
(5Rs) to achieve a new balance so that the Black Swan Event does not occur again in the future,
namely: 1) Resolve (Response), is a determination of how much the scale of the business
response required and how to achieve it so that it is secure and sustainable. In addition, it is
necessary to pay attention to the speed and depth of action required at the state, regional, and
business levels. Decisions that may be taken later are lockdown or not, isolation or quarantine,
closing the company or not 2) Resilience, which is making and developing clear plans for
various possible economic scenarios 3)Return (Reactivation), namely starting or reassessing,
and returning the business becomes successful down to the production level. 4) Reimagination,
namely increasing business operations to be more resilient, and 5) Reforming, which is learning
how to mitigate if the "Black Swan" scenario occurs again in the future.
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