The Anomalies of Winner and Loser Stock Portfolios: Investor Behavior in the Indonesian Sharia Stock Index

Abstract

The purpose of this study is to determine if winning and losing stock portfolios within the Indonesian Sharia Stock Index demonstrate overreaction or underreaction in the event of a pandemic caused by the COVID-19 virus. Across three times intervals that are not specified, both overreaction and underreaction are conducted for analysis. When examining the hypotheses, the paired samples t-test and the Wilcoxon signed rank test are both carried out with the assistance of SPSS. Over the course of all observation periods, the results show that the portfolio of the winner exhibits a significant overreaction anomaly. On the other hand, an underreaction anomaly that is statistically significant is discovered in each and every period for the portfolio that is losing. The results of this study indicate that investors have the ability to capitalize on the overreaction by taking a contrarian stance, which might potentially result in increased returns. When seen from the opposite perspective, the underreaction anomaly provides an opportunity for traders who have been unsuccessful to utilize the momentum approach and increase their earnings.