Error Correction Model on Determinants of LQ-45 Index

Abstract

The JCI and the forces influencing it are examples of long-term economic phenomena, and the ECM model is the ideal model to evaluate these economic variables. The Combined Portfolio Price Index (JCI), which measures the success of the Indonesian portfolio market, performs well [1]. All portfolio price performances listed on the development board of the Indonesia Stock Exchange are measured by the Composite Stock Price Index [2]. In addition to the Composite Portfolio Price Index (JCI), there are various more types of portfolio price indices available on the Indonesia Stock Exchange (IDX). The LQ45 Index was used as an observed sample in this investigation. The market capitalization value of 45 issuers is measured by the LQ45 index, which also includes the most liquid and largest market capitalization portfolio. LQ45 is regarded as a tool for evaluating the success of investments made via capital markets [3]. The LQ45 Index movement is employed as a statistic of portfolio movements with high liquidity so that the average value is shown, which is essentially representative of the state of the major portfolios in the national capital market. In order to correct the imbalance of the movement of the LQ-45 Index in the short term towards a long-term equilibrium and to be able to explain the relationship between bonded changers and free changers in the present and past, this research will: Add to the body of knowledge; Examine and analyze whether related macroeconomic variables affect the performance of the portfolio market in the short and long terms; View investment with the movement of the market.