How the Indonesia Stock Exchange Reacts to Information: A Speed of Adjustment Coeficients Study

This  study  applies  the  ARMA  model  to  estimate  the  speed  of  adjustment  coeficients, as  suggested  by  Theobald  and  Yallup  (2004),  in  the  IDX.  There  is  not  suficient  evidence to conclude that the IDX overreacts to information. However, the indings suggest that the market  either  underreacts  or  fully  adjusts  to  information.  The  IDX  displays  signiicant underreactions  at  weekly  intervals  that  occur  after  the  full  adjustment.  Investors'  reaction is not sensitive to the size and liquidity of the indices. Size alone could not provide suficient explanation for the different adjustment pattern across sector indices.