Abstract
This study aims to identify the effect of interest rate change policy made by Bank Indonesia during the period of January 2010-March 2016 to stock return of the property sector and real estate. In addition, this study also aims to test whether fluctuations in government bond yields, inflation, and indigo exchange also affect the stock returns of the property sector and real estate in Indonesia. By using purposive sampling, there are 15 companies that will be used as research samples. By using multiple linear regression analysis, there is no significant negative effect of interest rate (BI Rate) and inflation on stock return of the property sector and real estate. Nevertheless, it was found that the variable fluctuation of government bond yield and dollar exchange rate against rupiah had a negative and significant effect on stock returns of property and real estate sector in Indonesia. Increased bond yield would make investors choose other instruments as an alternative to investing money. In addition, investors also tend to choose to save money in the form of US Dollar rather than investing money in the capital market, further with the weakening of the value of the rupiah will increase the amount of foreign debt from the company.
Highlights
Capital markets are influenced by several factors, including uncertainty in the future domestic macroeconomic circumstances and the world monetary state
If the value of significance is less than 5% Ha is accepted and Ho is rejected, indicating that there is negative effect of fluctuations in bond yields, inflation rate, US Dollar exchange rate, and interest rates on changes in stock prices of the property sector
If the significance value obtained is greater than 5% Ha is accepted and H0 is rejected, indicating that there is no negative influence of fluctuations in bond yields, inflation rate, US Dollar exchange rate and interest rates on changes in stock prices of the property sector
Summary
Capital markets are influenced by several factors, including uncertainty in the future domestic macroeconomic circumstances and the world monetary state. Stock prices in the capital market will depend on external factors that influence investor’s decision to buy shares, such as inflation rate, rupiah exchange rate, and interest rate (Moore & Wang, 2014; Liu et al, 2014; Listriono & Nuraina, 2015; Reboredo et al, 2016). Interest rates, in this case the BI rate, represent the one-year interest rate set by Bank Indonesia (BI) as a benchmark for lending rates as well as savings for banks and/or financial institutions throughout Indonesia. Changes in bank interest rates will affect other capital market investment instruments, one of which is stocks and bonds
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