Market efficiency of dividend-paying firms under hawkish monetary policy: The case of Indonesia

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Type of article: Research Article

Abstract
Throughout 2024, interest rate changes and dividend announcements have become crucial information for investors in determining their investment portfolios. These two factors have different impacts on stock price movements in the market. This study aims to examine weak-form market efficiency based on these factors. The sample consists of companies that regularly announce and distribute dividends, as they are considered to attract significant investor attention. To test market efficiency, this study applies the runs test and variance ratio test to analyze time series data of stock returns adjusted for risk-free rates. The findings indicate that the Indonesian stock market in 2024 is relatively efficient, particularly in its weak form. The implication is that interest rate changes and dividend announcements play a crucial role in determining market efficiency. This condition is supported by rational investor behavior in allocating their investments between stocks and risk-free assets, assuming that dividends remain sufficiently profitable. This study contributes to the development of the efficient market hypothesis, particularly regarding the simultaneous entry of interest rate and dividend announcement information into the market. However, this study is limited by the sample criteria within a specific period. Therefore, future research is expected to expand the scope of analysis by incorporating additional factors.

Acknowledgment
The authors would like to express their sincere gratitude to Universitas Sam Ratulangi for the financial support provided for this study.

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    • Table 1. Descriptive statistics
    • Table 2. Mean difference test
    • Table 3. ADF test
    • Table 4. LB test-based on ARIMA
    • Table 5. Runs and VR tests (joint)
    • Table 6. VR test (individual)
    • Conceptualization
      Novi Swandari Budiarso
    • Formal Analysis
      Novi Swandari Budiarso
    • Methodology
      Novi Swandari Budiarso
    • Supervision
      Novi Swandari Budiarso
    • Writing – review & editing
      Novi Swandari Budiarso
    • Data curation
      Winston Pontoh
    • Funding acquisition
      Winston Pontoh
    • Investigation
      Winston Pontoh
    • Project administration
      Winston Pontoh
    • Resources
      Winston Pontoh
    • Software
      Winston Pontoh
    • Validation
      Winston Pontoh
    • Visualization
      Winston Pontoh
    • Writing – original draft
      Winston Pontoh
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Investment Management and Financial Innovations