Macroeconomic factors and LQ45 stock price index: evidence from Indonesia

Abstract

This paper provides the relationship between macroeconomic variables, including exchange rate, BI rate and inflation, and stocks performance, particulary bluechip stocks listed in LQ45 index in Indonesia Stock Exchange. The study particularly gives insights on bluechip stocks listed in LQ45 stock price index in Indonesia Stock Exchange between 2015 and 2017. The data were obtained from various sources during the period, including the Indonesia Stock Exchange (IDX), the Central Bank of Indonesia (BI), and the Ministry of Trade. This study followed a Vector Error Correction Model (VECM) attempting to estimate the relationship between variables both in the short term and in the long term. The findings of the study showed that in the long run, exchange rate, BI rate and inflation have a negative impact on stock market performance, particularly on LQ45 index in Indonesia Stock Exchange. It implies that an increase in macroeconomic variables results in the decline of stock market performance. Meanwhile, in the short run, two variables, namely the exchange rate and inflation, positively affect stock market performance in Indonesia. On the contrary, the relationship between BI rate and stock market performance showed a negative correlation. These findings have significant implication for the understanding of how macroeconomic variables affect the stock market performance, particularly LQ45 price index in Indonesia Stock Exchange.

The Effect of Macroeconomics on Stock Prices Through Financial Performance as an Intervening Variable

“…The results of this research are in line with previous research, which found that inflation had a significant effect on stock prices (Gwahula, 2018) (Utomo et al, 2019), but this is not in line with other research which found that inflation did not have a significant effect on stock prices on the Indian and American stock markets (Sahoo et al, 2020).…”

“…The results of this research are in line with previous research, which states that interest rates affect stock prices (Putri et al, 2019), but this is not in line with other research, which states that interest rates affect stock prices (Utomo et al, 2019), (Sahoo et al, 2020), (Gwahula, 2018).…”

The impact of macroeconomic variable movements on stock price index performance in consumer goods industry sector companies: Evidence from Indonesia

“…Where, Pn = Price calculated index number Po = Price on year basis It is expected that the research of the stock price index of the consumer goods industry sector can be a determinant of stock price movements in a period. According to research on macroeconomic factors and LQ45 stock price index by (Utomo et al, 2019), in the long run, simultaneously exchange rates, BI rates, and inflation have a significant negative influence on stock market performance. The increase in the value of macroeconomic factors has an impact on the decline in stock market performance.…”

“…Research contributions by(Eldomiaty et al, 2020),(Simbolon and Purwanto, 2018),(Mawardi, Widiastuti and Sucia Sukmaningrum, 2019),(Šimáková et al, 2019),(Utomo et al, 2019), and(Ho and Odhiambo, 2020), show that macroeconomic variables such as inflation have a significant influence on stock market movements both in terms of stock performance, stock prices, and stock returns. However, there are differences in inflation impacts from each study, where the results of research by(Simbolon and Purwanto, 2018), and (Mawardi, Widiastuti and Sucia Sukmaningrum, 2019) stated that there is a positive impact of rising inflation rate on capital market movements, while the results of research by (Eldomiaty et al, 2020), (Šimáková et al, 2019), (Utomo et al, Utomo et al, 2019), (Utomo et al, 2019), and (Ho and Odhiambo , 2020), states that there is a negative impact of rising inflation in the capital market.Empirical study by(Simbolon and Purwanto, 2018), (Nengah Aryasta and Sri Artini, 2019), shows that macroeconomic variables in the form of exchange rates have a positive significant influence on capital market movements, while empirical studies by(Chang and Meo, 2019),(Mroua and Trabelsi, 2019),(Utomo et al, 2019), and(Ho and Odhiambo, 2020), state that exchange rates have a significant negative impact on capital markets.Then based on the results of research by(Simbolon and Purwanto, 2018), by(Chang and Meo, 2019),(Mawardi, Widiastuti and Sucia Sukmaningrum, 2019),(Šimáková et al, 2019),(Utomo et al, 2019), and…”

Financial Management Model for Formal Workers in Indonesia

“…Whereas Lusardi and Mitchell (2011) observed that the lack of financial literacy is widespread, including in countries with well-developed financial markets. This lack of knowledge about investment is also the reason why these investment activities are not popular in Indonesian that makes the number of individual investors is still low compared to other countries (Utomo et al, 2019).…”