THE IMPACT OF INFLATION RATES AND US DOLLAR EXCHANGE RATES ON INDONESIAN STOCK MARKET INDEX RETURN VOLATILITY

Riko Hendrawan, Rifqi Dzakiri

Abstract


This paper studied the impact of inflation rates and US Dollar exchange rates in Indonesian stock market return volatility in the period of 2002-2012.  Daily data of stock market return, inflation rates and US Dollar exchange rates were used to estimate the daily volatility of the stock return. The data of stock market price, inflation rates and US Dollar exchange rates were taken from Yahoo Finance, Indonesia statistics bureau and central bank of Indonesia, respectively. The result showed that both inflation rates and US Dollar exchange rates did not have a significant impact on the Indonesian stock market return volatility. Inflation rates contributed 0.03% change in daily stock market return volatility whereas a 1% appreciation of Rupiah contributed to a 0.0000001% change in daily stock market return volatility. This research finding was different from the result in Nigeria where Yaya’s & Shittu’s (2010) research had the same variables. Inflation rates and US Dollar exchange rates were to examine the impact on Nigeria stock market index return volatility.


Keywords


GARCH, inflation rates, investment, stock market return, US Dollar exchange rates

References


Badan Pusat Statistik. 2012. Statistics Indonesia. http://www.bps.go.id/aboutus.php?inflasi=1. Retrieved: September 18, 2013.

BAPEPAMLK. 2012. Statistik Pasar Modal Depkeu RI. http://www.bapepam.go.id/pasar_modal/publikasi_pm/statistik_pm/index.htm. Retrieved: March 13, 2013.

Bank Indonesia Official Website. 2008. Kurs Transaksi BI-Bank Sentral Republik Indonesia. http://www.bi.go.id/web/id/Moneter/Informasi+Kurs/Kurs+Transaksi+BI/.

BBC News. 2013. Indonesia's Economy Slows to 6,2% Growth in 2012. http://www.bbc.co.uk/news/business-21333607. Retrieved: March 2, 2013.

BBC News. 2005. BBC News. http://news.bbc.co.uk/2/hi/business/4200100.stm. Retrieved: January 28, 2014,

Bodie, Z., Kane, A., & Marcus, A.J. 2009. Investments. Eighth Edition. McGrawHill International Edition.

Bollerslev, T. 1986. Generalized Autoregressive Conditional Heteroscedasticity. Journal of Econometrics, 31(3): 307-327.

Engle, R.F. 1982. Autoregressive Conditional Heteroskedasticity with Estimates of the Variance of U.K. Inflation. Econometrica, 50: 987-1008.

Gujarati, D.N. & Porter, D.C. 2009. Basic Econometrics. McGrawHill International Edition.

Hull, J.C. 2009. Options, Futures, and Other Derivatives. Seventh Edition. Pearson International Edition.

Mankiw, N.G. 2013. Macroeconomics. Eight Edition. Worth Publishers.

Rahadiana, R. & Chatterjee, N. 2013. Reuters: Indonesia Economy Slows in Fourth Quarter, Exports Weigh on Outlook. http://www.reuters.com/article/2013/02/05/us-indonesia-economy-gdp-idUSBRE91409920130205. Retrieved: March 2, 2013.

Saryal, F.S. 2007. Does Inflation Have an Impact on Conditional Stock Market Volatility?: Evidence from Turkey and Canada. International Research Journal of Finance and Economics, (11): 123-133.

Yaya, O.S. & Shittu, O.I. 2010. On the Impact of Inflation and Exchange Rate on Conditional Stock Market. American Journal of Scientific and Industrial Research, 1(2): 115-117.

World Bank Group: http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG/ countries/1W-ID?display=graph

Yahoo! Finance - Business Finance, Stock Market Qoutes, and News. 2013. JKSE Historical Prices Composite Index Stock - Yahoo Finance. http://finance.yahoo.com/q/hp?s=%5EJKSE&a=00&b=1&c=2002&d=11&e=31&f=2012&g=d. Retrieved: March 13, 2013.


Full Text: pdf

Refbacks

  • There are currently no refbacks.




rsz_8th_ifma rsz_6th_perbanas_conference rsz_the_6th_indonesian_finance_association_international_conference


Journal of Finance and Banking

Diploma Program of Banking and Finance
Faculty of Economics and Business University of Merdeka Malang

Mailing Address:

2nd-floor Banking and  Finance Building, Terusan Raya Dieng Street No.57 Malang, 65146, East Java, Indonesia
Phone/WhatsApp: +628123321664; Fax. +62 341 580511
Email:
jkpunmermlg@yahoo.com


Creative Commons License
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.