Analysis of the impact of foreign investor trading activity on return, liquidity, and volatility of the Indonesian Stock Market before and during the COVID-19 crisis period

The COVID-19 pandemic caused a decline in the Indonesian stock market performance. This paper analyzes how much of the decline was due to foreign investor trading activity and how much its impact differed prior to the crisis period. Stock market performance is proxied by return, liquidity, and volatility. Meanwhile, foreign investor trading activity is proxied by buying and selling volume, value, and frequency. Trading data for each period were processed through OLS regression with Newey–West’s HAC procedure. The results reveal that foreign investor trading activity caused a bi-directional impact on return and liquidity, where the impact on both was greater during the crisis period. Additionally, foreign investor trading activity impacted volatility significantly during the non-crisis period, while an increase in the trading activity increased volatility during the crisis period.