117 International Journal of Academic Research in Accounting, Finance and Management Sciences Vol. 9, No.2, April 2019, pp. 117–125 E-ISSN: 2225-8329, P-ISSN: 2308-0337 © 2019 HRMARS www.hrmars.com To cite this article: Praditha, R., Haliah, Habbe, A. H., Rura, Y. (2019). Market overreaction on LQ45 stock index before and after Asian Games 2018, International Journal of Academic Research in Accounting, Finance and Management Sciences 9 (2): 117-125. http://dx.doi.org/10.6007/IJARAFMS/v9-i2/6047 (DOI: 10.6007/IJARAFMS/v9-i2/6047) Market Overreaction on LQ45 Stock Index before and after Asian Games 2018 Riza Praditha 1 , Haliah 2 , Abdul Hamid Habbe 3 , Yohanis Rura 4 1 Accounting Department of STIE Tri Dharma Nusantara, 1 E-mail: rizapradithaa@gmail.com 2,3,4 Faculty of Economics and Business Hasanuddin University Abstract This study aims to see the impact of the implementation of Asian games 2018 event towards stock price movement. This study tested the occurrence of market reaction before and after the implementation of Asian games 2018 event. This study is an event study using explanatory methodology with quantitative approach. The population that is used in this study is companies that are listed on Indonesia Stock Exchange. Samples that are used in this study are 45 companies indexed by LQ45. Data sources that are used are from Indonesia Stock Exchange which is IDX Composite and Closing price one week before and one week after Asian Games 2018. Hypothesis is tested using Paired Sample T-Test to see the difference of abnormal return before and after Asian games 2018 for both winner stock portfolio and loser stock portfolio. The result of this study shows that market overreaction does not occur. Loser stock portfolio does not sustain price reversal to turn into winner stock portfolio and vice versa. This indicates that there is no anomaly occurs in efficient market over the event, winner stock remains to be winner stock and loser stock remains to be loser stock. Keywords Market Overreaction, Price Reversal, Winner-Loser Portofolio, Asian Games 2018 Received: 06 May 2019 © The Authors 2019 Revised: 12 June 2019 Published by Human Resource Management Academic Research Society (www.hrmars.com) This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode Accepted: 16 July 2019 Published Online: 20 July 2019 1. Introduction Efficient capital market introduced by Fama (1970) explains that if a market is said to be efficient if there is no investor is able to obtain abnormal return in a long term period of time. However, the efficient market does not always occurred because there are always anomalies such as market overreaction. De Bondt and Thaler (1985) stated that overreaction hypothesis is a phenomenon of inefficiency capital market because of the overreaction towards an information. It is said that investor tends to set the price too high due to the information that is considered as good news and on the contrary investor tends to set the price too low due to the information that is considered as a bad news. Market efficiency Hypothesis has become one of the most dominant theme in financial research. Overreaction phenomenon often occurs at winner and loser stock, it is because of reversal only occurs at loser stock or winner stock (Rosenberg et al., 1985). Hsieh dan Kathleen (2011) shows that there is a reversal of average of the loser stock than winner stock indicates that there is a quick correction to loser stock than winner stock, this phenomenon shows that the investors quickly decide to purchase or to sell the stocks. Ali et al. (2011) found a strong evidence that supports the overreaction hypothesis in Malaysia’s stock. The strongest reactions occurred in a period of one to four weeks. Stock loser sustain larger and higher reversal and return with low volume transactions.