Macroeconomic Variables, International Islamic Indices, and The Return Volatility in Jakarta Islamic Index

Abstract

According to understand the behavior of Islamic equity markets the primary objective of this research is to analyze the effect of macroeconomic indicators and International Islamic Index on return volatility of Jakarta Islamic Index. The analysis method used in this study is AutoRegressive Conditional Heteroscedastic-Generalized AutoRegressive Conditional Heteroscedastic (ARCH-GARCH). The result of this research showed that all variables, i.e., BI rate, inflation rate, IDR-USD exchange rate, DJIUS index, DJIUK index, FTSJP index and FTSMY index have a simultaneously significant impact on return volatility of JII. While t-test results show that BI rate, IDR-USD exchange rate, DJIUK index and FTSMY index have a substantial effect on return volatility of JII. Abstrak. Untuk memahami perilaku pasar ekuitas Islam, tujuan utama dari penelitian ini adalah untuk menganalisis pengaruh indikator makroekonomi dan Indeks Islam Internasional terhadap volatilitas Indeks Syariah Jakarta. Metode analisis yang digunakan dalam penelitian ini adalah Auto Regressive Conditional Heteroscedastic-Generalized Auto Regressive Conditional Heteroscedastic (ARCH-GARCH). Hasil penelitian menunjukkan bahwa semua variabel yaitu tingkat suku bunga BI, tingkat inflasi, nilai tukar IDR-USD, indeks DJIUS, indeks DJIUK, indeks FTSJP dan indeks FTSMY secara simultan berpengaruh signifikan terhadap volatilitas return JII. Sedangkan hasil uji t menunjukkan bahwa BI rate, kurs IDR-USD, indeks DJIUK dan indeks FTSMY berpengaruh signifikan terhadap volatilitas return JII. Kata kunci: variabel makroekonomi, indeks saham internasional, tingkat pengembalian volatilitasHow to Cite:

Assessing Volatilities of Monetary Policy and their Effects on the Islamic and Conventional Stock Markets in Indonesia

“…This finding implies that to stabilize the stock markets in the country, the policy-makers should control the stability of the interest rate, as one of the monetary instruments. This finding is in line with the studies by Majid and Yusof (2009) on the Malaysian Islamic stock markets, Majid (2016) and Pratama and Azzis (2017) on the Islamic stock market of Indonesia, and Muradoglu et al (1999) on the Turkish stock market.…”

“…The volatilities of stock returns are influenced by the economic performance, thus it is reasonable that changes in the future macroeconomic uncertainty, including the money supply and exchange rate, would cause the stock return to being volatile. The significance of money supply and exchange rate in affecting the stock markets is in harmony with the finding by Majid and Yusof (2009), Yusof andMajid (2006, 2007) on the Malaysian Islamic stock markets, Majid (2016) and Pratama and Azzis (2017) on the Islamic stock market of Indonesia. These findings further imply that in order to promote and enhance the development of both Islamic and conventional stock markets, the Indonesian government authorities should stabilize the money supply and exchange rate from higher volatility.…”

“…Previous studies on this issue have documented mixed findings. For example, the Islamic stock market of Malaysia is found to be free from interest rate (Yusof andMajid, 2006, 2007), while the Islamic stock market of Indonesia found to be based on the interest rate (Pratama and Azzis, 2017). Additionally, the volatility of Islamic stock market of Malaysia was influenced only by the economic growth and exchange rate (Yusof andMajid, 2006, 2007).…”

“…Additionally, the volatility of Islamic stock market of Malaysia was influenced only by the economic growth and exchange rate (Yusof andMajid, 2006, 2007). Meanwhile, the Islamic stock market in Indonesia is affected by the inflation rate, exchange rate, and global Islamic stocks (Pratama and Azzis, 2017). These different empirical findings quest for further intensive research to ensure robust evidence on the stock market volatility-monetary policy determinants relation, thus the concrete policy recommendation could be forwarded to stabilize and promote the Islamic stock market worldwide.…”

Impact of Macroeconomic Variabel and Global Indices on Islamic Stock Index: The Case Indonesia

“…A fall in net income will lead to a fall in earnings per share and ultimately to a fall in share prices in the market. There are various research results from Oktarina (2017); Artini et al, (2017); Pratama & Azzis (2018); Mawardi et al, (2019) show that interest rates have a negative effect on stock prices. But Pantas et al, (2019) show that interest rates not effect on stock prices in Indonesia.…”