Analysis of Investor Sentiment Impact in Indonesia Composite Stock Price Index Return Volatility

Abstract

The Composite Stock Price Index (IHSG) is an index used as an indicator of stock price movements on Indonesia Stock Exchange and reference of capital market activities. Stock securities have high risk because they do not have maturity such as bonds so volatility is one of the important things in stock investment. Investor sentiment is one of many external factors that affecting stocks volatility. Investor sentiment is one of behavioral finance assumptions which may cause systematic risk with noise so it affects stocks volatility. Therefore it is necessary to analyze the development of investor sentiment and its impact on IHSG volatility. This study used Business Tendency Index as investor sentiment proxy and monthly IHSG. Bank Indonesia Certificates is used to get excess return. GJR-GARCH method is used in this study along the periode from January 2001 to December 2015. The results showed that there is significant effect of investor sentiment on excess return. As investors are optimistic, the uncertainty in stock market will increase while IHSG volatility will increase as the average investor is pessimistic. There is noticeable leverage effect in the presence of negative shocks resulting in higher conditional variance changes compared to positive shocks on the same magnitude.

Islamic index market sentiment: evidence from the ASEAN market

“…In other words, the magnitude effect of sentiment on the index is the same for good news and bad news. This finding is supported by the research of Baker et al (2012); Ramli et al (2016), Widhiarti et al (2018); and Rupande et al (2019). The authors argued that individual investor sentiment influences stock returns.…”

“…In the ASEAN front, using the excess returns of Indonesian stocks, Widhiarti et al (2018) confirmed the significant effect of investor sentiment on excess returns. Ramli et al (2016) found that herding occurs in the Indonesian stock exchange owing to information asymmetry between domestic and foreign investors.…”

Investment Strategy Based on Bias Behavior and Investor Sentiment in Emerging Markets

“…Empirical evidence in Indonesia on sentiment based on news on the internet found that sentiment cannot be used to predict returns (Rizkiana et al, 2019). Another study in Indonesia stated that sentiment with proxy tendency business index significantly affects excess return (Widhiarti et al, 2018). Research in Indonesia on sentiment is conducted using proxies other than market information, so sentiment research with market data is necessary to enrich empirical evidence about sentiment Empirical evidence of 52-week highs is more done in developed countries or countries with high liquidity financial markets, such as the United States, Taiwan, etc.…”

PENGARUH PROFITABILITAS, STRUKTUR MODAL DAN KEPEMILIKAN MANAJERIAL TERHADAP RETURN SAHAM DENGAN NILAI PERUSAHAAN SEBAGAI VARIABEL MODERATING (Studi Empiris pada Perusahaan Sektor Pertanian di BEI)

“…Investor tetap akan membeli saham pada saat harga saham meningkat. Sejalan dengan yang ditemukan oleh Widhiarti (2018), dimana perilaku investor di Indonesia masih cenderung berspekulasi pada kenaikan harga, sehingga sering melewatkan faktorfaktor fundamental yang ada. Selain itu, proksi yang digunakan adalah ROE, dimana terdapat beberapa kasus perusahaan memiliki nilai ekuitas yang negatif dan mengalami kerugian, tetapi nilai pembaginya akan menjadi positif.…”