Asymmetric volatility and macroeconomic factors on Indonesian government bond returns

Debbie Megasari, Hermanto Siregar, Ferry Syarifuddin

Abstract


Macroeconomic are important variables influencing volatility in the bond market. Some of the challenges faced such as default risk, liquidity risk, interest rate risk, inflation risk, and exchange rate risk. This study is aimed at examining asymmetric volatility using the EGARCH model and at estimating macroeconomic variables which influence the return of Indonesian Government bonds. The asymmetric volatility can be measured by determining the best order value of the EGARCH model. Based on the findings of the study, EGARCH (2.1) is the best model for assessing volatility in short-term SUN returns, EGARCH (3.1) for medium-term SUN and EGARCH (2.3) for the long term. The asymmetric volatility pertains in the returns of short, medium and long-term government bonds. In addition, the negative information has a greater impact than positive information in the short, medium and long term. The deposit rate and return of the Composite Stock Price Index have a significant positive effect on short, medium and long term bond returns. The effective federal funds rate or FED interest rate has a significant positive effect on the return of short and long-term SUN bonds while in the medium term it has no effect. Exchange rates have a significant negative effect on short, medium and long term bond returns.

JEL Classification: D13, I31, J22

DOI: https://doi.org/10.26905/jkdp.v23i3.2613


Keywords


Asymmetric volatility; Bond return; EGARCH; Indonesian government bond; Macroeconomic

Full Text:

PDF

References


Barr, D. G., & Campbell, J. Y. (1997). Inflation, real interest rates, and the bond market: A study of UK nominal and index-linked government bond prices. Journal of Monetary Economics, 39(3), 361-383. http://dx.doi.org/10.1016/S0304-3932(97)00027-5

Brooks, C. (2007). Introductory Econometrics for Finance. United Kingdom: Cambridge University Press.

Cenedese, G., & Mallucci, E. (2016). What moves international stock and bond markets? Journal of International Money and Finance, 60, 94-113. https://doi.org/10.1016/j.jimonfin.2015.05.001

Chee, S. W., & Fah, C. F. (2013). Macro-economic determinants of UK treasury bonds spread. International Journal of Arts and Commerce, 2(1), 163-172.

Chow, E. H., Lee, W. Y., & Solt, M. E. (1997). The exchange rate risk exposure of asset returns. The Journal of Business, 70(1), 105-123. http://www.jstor.org/stable/2353483

Chulia, H., & Martens, M., & Dijk, D. V. (2010). Asymmetric effects of federal funds target rate changes on S&P100 stock returns, volatilities, and correlations. Journal of Banking and Finance, 34(4), 834-839. https://doi.org/10.1016/j.jbankfin.2009.09.012

DJPPR. Direktorat Jenderal Pengelolaan Pembiayaan dan Risiko Kementerian Keuangan. Posisi Outstanding Surat Berharga Negara 2019. Jakarta: Kementerian Keuangan (Ministry of Finance).

Engle, R. F., & Li, L. (1998). Macroeconomic announcement and volatility of treasury futures. The Discussion Paper. University of California.

Engle, R. F., & Ng, V. K. (1993). Measuring and testing the impact of news on volatility. The Journal of Finance, 48(5), 1749-1778. https://doi.org/10.3386/w3681

Ervina, D. (2015). Macroeconomic news and price discovery in the Indonesian government bond market. Information Management and Business Review, 7(4), 98-107.

Evans, C. L., & Marshall, D. A. (1998). Monetary policy and the term structure of nominal interest rates: Evidence and theory. Carnegie-Rochester Conference Series on Public Policy, 49, 53-111. https://doi.org/10.1016/S0167-2231(99)00004-4

Ferdiansyah & Tin, S. (2016). Globalisasi ekonomi, integrasi ekonomi global, dinamika pasar modal & kebutuhan standar akuntansi internasional. Jurnal Akuntansi, 8(1), 119-130.

Goeij, P., & Marquering, W. (2006). Macroeconomic announcements and asymmetric volatility in bond returns. Journal of Banking and Finance, 30(10), 2659-2680. https://doi.org/10.1016/j.jbankfin.2005.09.014

Juanda, B., & Junaidi. (2012). Ekonometrika Deret Waktu. Bogor: IPB Press.

Masyhuri, M. (2016). Pengaruh indikator makroekonomi terhadap perubahan harga obligasi pemerintah di pasar sekunder. Dissertation (Unpublished). Sekolah Bisnis IPB. Bogor

Mehrara, M., & Abdoli, G. 2005. Modeling the impact of news on volatility: The Case of Iran. Iranian Economic Review (IER), 10(1), 65-83.

Mishkin, F. S. (2008). Ekonomi Uang, Perbankan, dan Pasar Keuangan. Jakarta: Salemba Empat.

Nelson, D. B. (1991). Conditional Heteroskedasticity in Asset Returns: A New Approach. Econometrica, 59(2), 347-370. http://dx.doi.org/10.2307/2938260

OJK. (2017). Laporan Tahunan 2016. Jakarta: Otoritas Jasa Keuangan.

OJK. (2018). Simpanan Deposito. Retrieved from: https://sikapiuangmu.ojk.go.id/FrontEnd/CMS/Category/121. October 23, 2018.

Rahma, M. (2017). Volatilitas asimetrik obligasi pemerintah Indonesia: Pendekatan E-GARCH. Dissertation (Unpublished). Sekolah Bisnis IPB. Bogor: IPB.

Raza, N., Shahzad, S. J. H., Tiwari, A. K., & Shahbaz, M. (2016). Asymmetric impact of gold, oil prices and their volatilities on stock prices of emerging markets. Resources and Policy, 49, 290-301. https://doi.org/10.1016/j.resourpol.2016.06.011

Sarmiento, J., Callon, E., Collazos, M., & Sandoval, J. (2017). Positive asymmetric information in volatile environment: The black market dollar and sovereign bond yield in Venezuela. Research in International Business and Finance, 41: 547-555. https://doi.org/10.1016/j.ribaf.2017.04.047

Smaoui, H., Grandes, M., & Akindele, A. (2017). The determinants of bond market development: Further evidence from emerging and developed countries. Emerging Market Review, 32: 148-167. https://doi.org/10.1016/j.ememar.2017.06.003

Sukanto, E. (2009). Pengaruh suku bunga deposito, kurs Rupiah-USD, tingkat inflasi, IHSG, dan volume transaksi terhadap harga obligasi pemerintah RI (SUN). Fokus Ekonomi, 4(2), 9-23.

Sukanto, E., & Widaryanti. (2015). Pengaruh rate bunga deposito, nilai tukar rupiah, dan besaran inflasi terhadap harga obligasi Pemerintah Republik Indonesia (Periode 2009-2013). Jurnal Dinamika Ekonomi dan Bisnis, 12(2), 132-149.

Tanjung, H., Siregar, H., Sembel, R., & Nurmalina, R. (2014). Factors affecting the volatility of the Jakarta composite index before and after the merger of two stock and bond markets in Indonesia. Asian Social Science, 10(22). https://doi.org/10.5539/ass.v10n22p91

Tsay, R. S. (2005). Analysis of Financial Time Series. New Jersey: John Wiley & Sons Inc.

Tsen, W. H. (2017). Real exchange returns and real stock price returns. International Review of Economics & Finance, 49, 340-352. https://doi.org/10.1016/j.iref.2017.02.004

Widoatmodjo S. (2007). Cara Sehat Investasi di Pasar Modal. Jakarta: Jurnalindo Aksara Grafika.

Wu, G. (2001). The determinants of asymmetric volatility. The Review of Financial Studies, 14(30): 837-859. https://doi.org/10.1093/rfs/14.3.837




DOI: https://doi.org/10.26905/jkdp.v23i3.2613

Refbacks

  • There are currently no refbacks.


Bookmark and Share


Jurnal Keuangan dan Perbankan (Journal of Finance and Banking)

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

Published by University of Merdeka Malang

Mailing Address:
2nd floor Finance and Banking Building, Jl. Terusan Raya Dieng No. 57 Malang, East Java, Indonesia
Phone: -
Email: [email protected]

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