The Islamic Capital Market Volatility: A Comparative Study Between in Indonesia and Malaysia

Abstract

This study attempts to examine the short-term and long-term relationship among selected global and domestic macroeconomic variables from each country (Fed rate, crude oil price, Dow Jones Index, interest rate, exchange rate and inflation) for Indonesia and Malaysia Islamic capital market (Jakarta Islamic Index (JII) and FTSE Bursa Malaysia Hijrah Shariah Index (FHSI). The methodology used in this study is vector error correction model (VECM) for the monthly data starting from January 2006 to December 2010. The result shows that in the long-term, all selected macroeconomic variables except Dow Jones Index variable have significantly affect in both Islamic stock market FHSI and JII, while in the short-term there is no any selected macroeconomic variables that significantly affect FHSI and only inflation, exchange rate and crude oil price variables seem to significantly affect JII. Keywords : Islamic Stock Market, Jakarta Islamic Index, FTSE Hijrah Shariah Index, VAR/VECMJEL Classification: E52, E44

Assessing Volatilities of Monetary Policy and their Effects on the Islamic and Conventional Stock Markets in Indonesia

“…In the context of Indonesia, both short-and long-run relationship between macroeconomic determinants and Islamic stocks using Vector Error Correction Model (VECM) (Antonio et al, 2013) and variance decompositions (Majid, 2016) techniques, found that inflation, money supply, exchange rate, and crude oil price significantly affected the Islamic stocks, showing the importance of these macroeconomic determinants to be focused on when stabilizing Islamic stock markets in the country. As for measuring the volatilities of Islamic stock markets, in his simple study using only the Time Series Plots and Histogram, Tanjung (2014) found that the Jakarta Islamic Index (JII) was abnormally distributed.…”

Impact of Macroeconomic Variabel and Global Indices on Islamic Stock Index: The Case Indonesia

“…Of course, this is an opportunity for companies to boost the amount of exports that can in turn affect corporate earnings and encourage rising stock prices. From different studies there are differences in the findings, Sakti & Harun (2013); Bekhet & Matar (2013); and Antonio et al, (2013) that the exchange rate has a positive relationship with the stock price index. In contrast to the findings of Oktarina, (2017); Artini et al, (2017); and Wei et al, (2019) exchange rates have a negative effect on stock prices.…”

“…The focus in this study is on equities, so when investing in the capital market the value of stock prices becomes an important consideration. According to Antonio et al, (2013) the price of shares on the capital market is not only influenced by internal companies, but can also be influenced by macroeconomic variables. Stable macroeconomic conditions ensure that investors feel safe and comfortable investing their funds.…”

“…The performance of the Sharia capital market reflected in the Indonesian Sharia Stock Index cannot be avoided due to risks due to changes in macroeconomic variables. According to Antonio et al, (2013) in accordance with the conditions of economic globalization, stock prices are not only influenced by domestic macro conditions, but also by global macro conditions. So, the focus of this research is to view and analyze the influence of domestic macroeconomic factors and global indices on the Indonesian Sharia Stock Index.…”

Empirical Study About Islamic Stock Index Case in Indonesia

“…Countries with good economic stability usually have stable currencies and their movements. Countries with poor economic stability, their currencies tend to move erratically and tend to weaken [14,15].…”