How Does the Indonesian Capital Market React to The Palestine-Israel Conflict? An Empirical Study of Hotel, Tourism, and Restaurant Sub-Sector

Abstract

The Palestine-Israel war has become a public concern because the genocide in Palestine has caused security disturbances and political shocks that have occurred in the world. This study aims to determine the effect of war events on market reactions that will be reflected in the Abnormal Return (AR) and Trading Volume Activity (TVA) values around the event window period. The event window used is twenty-one trading days, namely ten days before (t-10) and ten days after (t+10), and the event date (t-0) which falls on October 9, 2023. This study is a quantitative study using secondary data. The sample was used by 33 companies engaged in the hotel, tourism, and restaurant sub-sectors and listed on the IDX. Researchers in this quantitative study used the documentation method to obtain research data and used the market−customized model method to calculate the Abnormal Return (AR) value and Trading Volume Activity (TVA). The results of the study show that the Palestine-Israel war had no impact on Abnormal Returns (AR) in the Indonesian capital market but had an impact on Trading Volume Activity (TVA). This findings make significant contribution, as they demonstrates that geopolitical shocks can influence investor trading behavior without immediately affecting price, challenging the efficient market hypothesis in the context of emerging markets during geopolitical crises. The study provides implications that investors, portfolio managers, and policymakers need to understand market dynamics during international conflict.