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Homework 5

Student Name: Fauzan Isnaini

Predicting Stock Market Recovery in Indonesia after COVID-19 Crash

Team

I will conduct this study by myself.

Topic

The COVID-19 Pandemic is not just a crisis in the public health sector. It also impacts unemployment rates, business revenues, and mass psychology, which in the end lead to crashes in global stock markets. While some stock indexes like the Dow Jones Industrial Average (DJIA) and NASDAQ Composite already recovered, the Indonesian Stock Market Index (IDX Composite) is still far below its price before the pandemic. Some of the possible causes are: 1. Foreign investments represent about 50% of the total fund in the IDX stock exchange. In a pandemic situation, foreign investors might choose to withdraw their stocks and find another safer country to invest in. 2. Unpredictability of the pandemic situation drives investors to reallocate their funds in safer assets, such as cash, gold, or USD. 3. Changes in the macroeconomic situation, such as unemployment rate, Indonesian Rupiah (IDR) exchange rate, and interest rate. 4. Changes in the consumer buying power also change the business revenues, thus changing fundamental data. 5. Mass psychology of investors that the stock market is not safe in this pandemic situation, holding them from returning to the stock market To predict the time needed for IDX Composite to recover, there are two indicators that can be utilized: 1. Fundamental indicators, which represent the financial aspect. This can be in the form of macroeconomic data and a company financial report 2. Technical indicators, which represent the mass psychology of investors. This can be obtained from news, social media, or statistical analysis of how the stock market moves

Dataset

In predicting the outcome, I will utilize these datasets: 1. Yahoo Finance (finance.yahoo.com). Yahoo Finance contains a lot of both fundamental and technical data, and they are free of charge. 2. Twitter (twitter.com). I can conduct a content analysis on Twitter to represent the mass psychology regarding the economic condition in Indonesia 3. News channel. I can also utilize data crawler software to conduct content analysis to compare positive and negative news in Indonesia. 4. Third party stock data feeder. There are some third parties who provide more comprehensive stock data on a subscription basis. This is another option if the above datasets are not sufficient

What needs to be done to get a great grade

I will build a Python program to learn these data and generate a prediction on when the IDX Composite will recover. I will also consider the recovery rate of each of these sectors: 1. Mining 2. Agriculture 3. Finance 4. Infrastructure 5. Miscellaneous Industries 6. Consumers' Goods 7. Property 8. Trading 9. Basic Industry While they are incorporated in the IDX Composite, the recovery rate of each sector may be different because of their respective nature of the industry. For example, consumer’s goods may be impacted less in this COVID-19 pandemic, thus resulting in a faster recovery. On the other hand, the property sector might be the most impacted sector in this pandemic, thus resulting in a long time to recover. The program will be able to learn continuously, so if new data is available, it can renew the analysis and give a more accurate prediction.