Detecting an Existence of Bubble Price in Indonesian Islamic Stock

Abstract

<i>Purpose</i> –The implementation of the Islamic capital market in Indonesia applies the principles of Islamic capital participation that meets the principles of sharia i.e. non-bubble stock. Screening of Islamic companies through methods applied by authority agencies with certain prerequisites actually cannot avoid speculative actions that represent with bubble price. This research intended to detect the existence of bubble price in the Indonesian Islamic Stock Index. This very useful for society that the grouping of an asset was not enough to get an Islamic principe. The current model or tools to analyse and detect the existence of bubble, the application of those method in Islamic assets was not avalibale. In order to appropriate with Islamic principes, the Islamic assets are not allowed contain bubble. This paper introduce that those principes establish or not using this paper analysis. An econometrical model as well as an equation, according to monthly data, Indonesian Islamic Stock Index (IDXS) variable analysed by Right Tail Augmented Dickey Fuller (RTADF) approach. This tool very useful to detect and date-stamping of bubble with more accurately than other tools. The results shows that Indonesian Islamic stock market contain or existing the price of bubble, even Islamic stock with any prohibition and selective instrument can not avoid from bubble phenomenon. The stock may exhibit sharia value, but if the market play the role, so that these value may fallen away.