Factors Affecting the Indonesia Stock Exchange: A Multi-Index Approach

Didik Susilo,Irene Rini Demi Pangestuti,Sugeng Wahyudi

doi:10.5430/ijfr.v11n2p196

Abstract

This study examines the influence of world and regional capital market conditions on the Indonesian capital market (Indonesia Stock Exchange) condition. The DJIA (Dow Jones Industrial Average) index was used as a representative of the international capital market while the Hang Seng index and the Nikkei 225 index were used as a representative of regional capital market conditions. These two indices were chosen because the Japanese capital market was one of the most advanced capital markets in the world and the Hong Kong capital market, although not as big as Japan, still played an important role in the world. The data were obtained from Yahoo Finance during the period of 2014-2018. The dependent variable was the change in the JCI (Jakarta Composite Index), while the independent variables were changes in the index of DJIA, Nikkei 225 and Hang Seng index. Using daily data analyzed by the ARIMA method (1,1), it was found that there was a significant positive effect of DJIA with lag 1 and Hang Seng index on the JCI, but no significant effect was found from the Nikkei 225 index on the JCI.

Highlights

1.1 Background of the StudyIn the era of globalization where economic boundaries between countries have increasingly blurred, economic activity is limited to the domestic environment but has been cross country
In a case where a country's capital market is integrated with the world capital market, Sharma and Seth (2012) suggested that there was an information relationship between the local capital market represented by a composite stock price index in a country with the world capital market such as the Dow Jones Industrial Average (DJIA) index
After analyzing the research results that have been described, this study finds that there was a significant positive effect of international capital market conditions represented by the DJIA index on the condition of the Indonesia Stock Exchange

Summary

Introduction

1.1 Background of the StudyIn the era of globalization where economic boundaries between countries have increasingly blurred, economic activity is limited to the domestic environment but has been cross country. In a case where a country's capital market is integrated with the world capital market, Sharma and Seth (2012) suggested that there was an information relationship between the local capital market represented by a composite stock price index in a country with the world capital market such as the Dow Jones Industrial Average (DJIA) index. They even detected a reciprocal relationship between the two. Robiyanto and Ernayani (2018) showed that there was an interdependence between local and world capital markets as measured using the DJIA index indicator. Antoniou, Pescetto, and Stevens (2007) found that the condition of the American capital market was such a global factor that affected both the established and the emerging market

Methods

Results

Conclusion