Proceedings of the 3rd International Conference of Islamic Finance and Business, ICIFEB 2022, 19-20 July 2022, Jakarta, Indonesia

Research Article

Volatility Transmission In Indonesia’s Conventional and Sharia Stocks Market Index

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  • @INPROCEEDINGS{10.4108/eai.19-7-2022.2328221,
        author={Fikri C Permana and M Ali Irfan and M Fajar  Ilham and Ahmad  Rodoni},
        title={Volatility Transmission In Indonesia’s Conventional and Sharia Stocks Market Index},
        proceedings={Proceedings of the 3rd International Conference of Islamic Finance and Business, ICIFEB 2022, 19-20 July 2022, Jakarta, Indonesia},
        publisher={EAI},
        proceedings_a={ICIFEB},
        year={2023},
        month={4},
        keywords={volatility transmission indonesia’s stocks market},
        doi={10.4108/eai.19-7-2022.2328221}
    }
    
  • Fikri C Permana
    M Ali Irfan
    M Fajar Ilham
    Ahmad Rodoni
    Year: 2023
    Volatility Transmission In Indonesia’s Conventional and Sharia Stocks Market Index
    ICIFEB
    EAI
    DOI: 10.4108/eai.19-7-2022.2328221
Fikri C Permana1,*, M Ali Irfan1, M Fajar Ilham1, Ahmad Rodoni1
  • 1: UIN Syarif Hidayatullah Jakarta
*Contact email: fikri.c.permana@gmail.com

Abstract

This study aims to determine the source of volatility transmission and performance of the Indonesia stock market index, both conventional (Jakarta Composite Index-JCI) and sharia (Jakarta Islamic Index – JII). Since there is a differences in investment principles and should be translated to the different source of volatility between these two indexes. Therefore, this study used global macro conditions (proxied by Brent-Oil Prices and Gold Price); relationship among financial markets (proxied by the Dow Jones Industrial Average-DJIA); as well as the fundamental condition of Indonesia (proxied by the Rupiah exchange rate and Yield of Rupiah 10 Year Bonds or SUN) as independent variables that may be becomes the source of volatility. This research used the stochastic econometric approach with the fundamental approach (multibreak structural model) and volatility approach (ARCH/GARCH model). The data used in this study uses daily data between 2 January 2019 to 31 May 2022. Furthermore, found that there were more structural breaks in JKSE than JII. In addition, since the period of structural breaks period of JKSE and JII after the extraordinary pandemic event that was still the same until the end of the observation showed that the impact of the pandemic had not ended yet. In addition, found that Indonesia's economic fundamentals (USDIDR and INDO10) have a larger coefficient of magnitude and impact on the volatility of the both index than other variables.