This study aims to analyze the differences in investor behavior and financial performance and their impact on

in the average abnormal return, while the average trading volume shows a significant difference before and

after the event. Event study 2 shows no significant difference in either the abnormal return or the trading

volume before and after the event. While the test results on event study 3 show that there is a significant

difference in both abnormal returns and trading volume before and after the event.

The long-standing conflict between Israel and Palestine reignited following the violent escalation on October

7, 2023. Although a ceasefire was declared on January 23, 2025, casualties continued to rise. As of January 27,

more than 47,306 Palestinians (Detik.com, 2025), mostly women and children, had lost their lives, while Israel

reported over 15,000 military casualties (Tribunnews.com, 2025).

(Kumparan.com, 2023). The fatwa had immediate financial implications; PT Sarimelati Kencana Tbk (Pizza

Hut licensee) reported a significant drop in sales, and PT Unilever Indonesia Tbk experienced notable share

price volatility in the weeks that followed (Yahoo Finance, 2023).

Figure 1. Share Price Fluctuation of PT Unilever Indonesia Tbk During October-December 2023

Source : Finance.yahoo.com (2023)

Stock performance data from October to December 2023 showed that boycotted companies faced fluctuating

investor sentiment, with Unilever shares falling to Rp 3,400 before recovering slightly (Yahoo Finance, 2023).

Similarly, the Jakarta Composite Index (IHSG) displayed volatile movements during this period, reflecting

investor reactions to geopolitical tensions and related events.

particularly when firm profitability is at stake (Ainulyaqin et al., 2019). The boycott campaign, supported by

the BDS movement, affected public perception and trading activities of brands perceived as pro-Israel. For

instance, Unilever’s global stock price declined significantly following boycott calls, before partially

rebounding in early November 2023.

Empirical evidence supports the link between geopolitical events and trading volume activity. Satria &

Supatmi (2013) and Chairunesia et al. (2024) both reported significant differences in trading volume before

and after key events. Conversely, Feranita (2014) found no significant volume change in her study.

The problem formulations in this study are:

1. Is there a significant difference in Abnormal returns on Israeli-affiliated products and local non-affiliated

affiliated Israeli products before and after one month since the beginning of the Palestinian-Israeli conflict?

5. Is there a significant difference in Abnormal Return on Israeli-affiliated products and local non-affiliated

Israeli products before and after the issuance of the MUI fatwa forbidding buying products affiliated with

Israel?

6. Is there a significant difference in Trading Volume Activity on Israeli-affiliated products and local non-

affiliated Israeli products before and after the issuance of the MUI fatwa forbidding buying products

affiliated with Israel?

7. Is there a significant difference in Abnormal return on Israeli affiliated products and local non-affiliated

Israeli products before and after the start of the ceasefire?

8. Is there a significant difference in Trading Volume Activity on Israeli-affiliated products and local non-

Signaling theory, originally conceptualized by Spence in 1973, describes the communication process between

two primary stakeholders: corporate management and investors. In this framework, management functions as the

signal provider, while investors act as the recipients and interpreters of such signals. These signals typically

consist of information regarding the firm’s future prospects, which investors utilize to inform their decision-

making. The market subsequently reacts to these signals, interpreting them either as positive or negative

indicators. Favorable signals—such as earnings announcements, revenue growth, or dividend declarations—are

generally associated with an upward adjustment in stock prices. In contrast, unfavorable signals, including

financial losses, rising debt levels, or declining sales, are likely to result in downward pressure on stock

valuations.

The Palestinian–Israeli conflict has adversely affected companies perceived to be affiliated with Israel,

capital market. In this study, the event study approach is applied to examine abnormal return and trading

volume activity surrounding five key events: the outbreak of the Palestinian–Israeli conflict, one month after

the outbreak, the issuance of the MUI fatwa prohibiting the purchase of Israeli-affiliated goods, the start of the

ceasefire, and the end of the ceasefire.

Abnormal return refers to the difference between the actual return observed in the capital market and the return

expected by investors. It often arises in response to specific events such as national holidays, political shocks,

or corporate actions like IPOs and stock splits. Jogiyanto (2017: 667) defines abnormal return as the excess

return earned beyond what is normally expected, representing investor reactions to new or unexpected

information.

Israeli conflict—as a positive or negative signal in their decision-making. TVA is typically calculated as the

ratio of traded shares to the total outstanding shares.

Palestine–Israel conflict. Five key events were identified:

1. The outbreak of conflict (7 October 2023)

2. One month after the outbreak

3. Issuance of a fatwa by the Indonesian Ulema Council (MUI) banning the purchase of Israeli-affiliated

products (10 November 2023)

4. The beginning of a ceasefire (19 January 2025)

5. The end of the ceasefire (2 March 2025)

The study focuses on the calculation of average abnormal returns (AAR) and average trading volume (ATV)

over an 11-day event window (t-5 to t+5). Data were collected from selected public companies listed on the

Indonesia Stock Exchange (IDX) that were either affiliated with Israeli products or classified as local non-

According to Sugiyono (2019: 133) [14] the saturated sampling method is a method of determining the sample,

where all members of the population are used as samples.

The sample in this study amounted to 3 products suspected of being affiliated with Israel (ADES Mineral

Water, KFC and Unilever) and 3 local non-affiliated products (CLEO mineral water, CFC and KINO). All

samples are publicly listed companies that can be accessed to stock price data, up to the number of shares

traded.

The data collection method in this study was carried out in several ways as follows:

1. Documentation, namely data collection available on the object of research, in this case in the form of

company financial report documents listed on the Indonesia Stock Exchange which are downloaded from

the sites http://www.idx.co.id/ and https://id.investing.com/.

perception and behavior.

investor concern and monitoring of firms tied to the conflict. Non-affiliated firms exhibited irregular volume

spikes, particularly at t-2 and t+2, suggesting short-term speculative trading.

Table 2. Differential Test of Average Abnormal Return and Trading Volume Activity on Affiliated Products vs

became more neutral.

Table 3. Differential Test of Average Abnormal Return and Trading Volume Activity on Affiliated Products vs

Non-Affiliated Local Products Before and After One Month After the Beginning of the Palestine-Israel

Following the MUI fatwa issued on November 10, 2023, market behavior shifted sharply. While both affiliated

and non-affiliated firms fluctuated pre-fatwa, the announcement triggered a strong positive AAR (0.065) for non-

affiliated stocks and only a marginal increase for affiliated firms. Subsequently, affiliated firms faced consistent

negative returns, while non-affiliated stocks retained high positive AAR.

Figure 4. Graph of Average Abnormal Return and Average Trading Volume of Affiliated Products vs. Non-

confirmed marginal significance in AAR (p = 0.050) and a significant difference in volume (p = 0.033),

highlighting asymmetric market responses to religiously motivated signals.

Non-Affiliated Local Products Before and After the issuance of MUI's fatwa prohibiting buying products

affiliated with Israel

During the ceasefire initiation on January 19, 2025, both affiliated and non-affiliated stocks exhibited unstable

2025)

Source: Data processed, 2025

Trading volumes remained low and stable for both stock types, with only minor increases for non-affiliated

firms. The Wilcoxon test found no significant difference in AAR (p = 0.767) but a significant difference in

volume (p = 0.004), reflecting increased trading activity for affiliated firms likely due to renewed investor

interest amid easing geopolitical tension.

Table 5. Differential Test of Average Abnormal Return and Trading Volume Activity on Affiliated Products vs

Non-Affiliated Local Products Before and After the Start of the Ceasefire in the Palestinian-Israeli conflict

(January 2025)

followed by a gradual recovery, forming a V-shaped trend. This indicates investor optimism returning once

conflict dynamics shifted. Conversely, non-affiliated firms peaked at t-2 (+5.37%) and declined consistently

thereafter, signaling waning interest post-conflict.

Figure 6. Graph of Average Abnormal Return and Average Trading Volume of Affiliated Products vs. Non-

Affiliated Local Products Before and After the End of the Ceasefire in the Palestinian-Israeli conflict (March

2025)

Source: Data processed, 2025

Trading volume for affiliated stocks surged before and during the event (reaching 0.006940), then gradually

declined post-event, suggesting speculative activity around political transition. Non-affiliated firms showed