The Short-Run And Long-Run Relationship In The Indonesia Islamic Stock Returns

Abstract

The Short-Run and Long-Run Relationship in Indonesia Islamic Stock Returns. This paper aims at empirically examining the short-run and long-run causal relationship between the Indonesian Islamic stock returns and selected macroeconomic variables namely inflation, money supply and exchange rate during the pre-and post-2008 global financial turmoil period from 2002 until 2007 and from 2008 until 2013 by using monthly data. The methodology used in this study is time series econometric techniques i.e. the unit root test, cointegration test, error correction model (ECM) and variance decompositions (VDCs). The findings showed that there is cointegration between Islamic stock prices and macroeconomic variables. The results suggest that inflation, money supply, and exchange rate significantly affected the Islamic stock returns in Indonesia. These variables should be taken into account by the policy makers as the important policy instruments in stabilizing Islamic stock markets in the country. Abstrak. Hubungan Jangka Pendek dan Jangka Panjang Pada TingkatPengembalian Saham di Indonesia. Tulisan ini bertujuan untuk menguji secara empiris hubungan kausalitas jangka pendek dan jangka panjang antara pasar saham Syari'ah dengan variabel makroekonomi terpilih, yaitu inflasi, permintaan uang, dan valuta asing di Indonesia pada periode sebelum dan sesudah krisis keuangan global 2008. Data bulanan selama periode sebelum krisis global (2002 -2007) dan periode setelah krisis (2008 -2013) dianalisis dengan menggunakan teknis ekonometrik runtut waktu yang terdiri dari uji unit root, kointegrasi, model error correction, dan dekomposisi varians. Hasil penelitian menunjukkan bahwa pasar saham Syari'ah berkointegrasi dengan variabel makroekonomi. Inflasi, penawaran uang, dan valuta asing berpengaruh signifikan terhadap pasar saham Syari'ah. Ini menunjukkan bahwa dalam rangka menstabilisasikan dan sekaligus mempromosikan pasar saham Syari'ah di Indonesia, pengambil kebijakan harus fokus pada pengendalian inflasi, jumlah uang yang beredar, dan valuta asing.

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.…”

“…In the context of Indonesia, both short-and long-run relationship between macroeconomic determinants and Islamic stocks using Vector Error Correction Model (VECM) (Antonio et al, 2013) and variance decompositions (Majid, 2016) techniques, found that inflation, money supply, exchange rate, and crude oil price significantly affected the Islamic stocks, showing the importance of these macroeconomic determinants to be focused on when stabilizing Islamic stock markets in the country. As for measuring the volatilities of Islamic stock markets, in his simple study using only the Time Series Plots and Histogram, Tanjung (2014) found that the Jakarta Islamic Index (JII) was abnormally distributed.…”

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

“…This fact will reduce the profit of various industries due to decreased sales revenue. Majid (2016) found that the Inflation, money supply, and exchange rate affect the Islamic stock returns in Indonesia.…”

Who Co-Moves The Islamic Stock Market of Indonesia -The US, The UK, or Japan?

“…Among the studies focused on the integration of Islamic stock markets is conducted by Majid and Kassim (2010) using the Autoregressive Distributed Lag (ARDL) framework during the 1999-2006 period, and documented that the Islamic stock markets tended to become more interlinked, thus implying the decline of diversification benefits when investing in the Islamic stocks globally. Moreover, other existing empirical studies on the Islamic stock market in Indonesia only measured the performance (Tulasmi and Trihariyanto, 2016) and its determinants (Majid, 2016a(Majid, , 2016bBeik and Fatmawati, 2014;Ali, 2014. Baroroh, 2013Azwar et al, 2011).…”

“…Moreover, other existing empirical studies on the Islamic stock market in Indonesia only examined their determinants (Majid, 2016a(Majid, , 2016bBeik and Fatmawati, 2014;Ali, 2014;Baroroh, 2013;and Azwar et al, 2011). These studies found that money supply, inflation, interest, exchange rate, the conventional stock market, economic growth affect the Islamic stock market (Baroroh, 2013;Beik and Fatmawati, 2014;Majid, 2016b). Azwar et al (2011) found that debt ratio, profitability, and interest rate affected the Islamic stock markets.…”