PENGUJIAN LEVERAGE EFFECT HYPOTHESIS PADA BERBAGAI TINGKAT INFLASI DI PASAR MODAL INDONESIA

Abstract

This research has a purpose to examine and analyze the leverage effect hypothesis on several inflation levels in Indonesia Stock Exchange. In his seminal paper, Black (1976) stated that the leverage effect hypothesis is the condition in which a drastic fall in stock return is followed by the increase in stock price volatility. The increase in stock price volatility is the reflection of the increase in stock risk. Risk is the main consideration of investors in making stock investment decisions aside from stock return. The methods used to examine and analyze the leverage effect hypothesis in thus research are the TARCH and EGARCH. The sampling method in this study is purposive sampling, in which the research period is determined based on the level of inflation. There are three periods employed namely, the low inflation period (January 2016- August 2018), the normal inflation level period (January 2012- December 2015), and the period of high inflation level (January 2005-December 2006). The data source in this study is the Indonesia Stock Exchange and the Bank of Indonesia. The novelty in this study is the leverage effect hypothesis which is performed on several periods with different inflation levels. The difference in inflation level in each period which results in different pressure towards the risk of stock investment has never been studied before. The test and analysis result shows that there are leverage effects in each test period. There is a tendency in which the increase in inflation level entails a greater risk contained in the stock investment. The findings in this study provide significant contributions to the enrichment of the leverage effect hypothesis in various inflation levels.Keywords: EGARCH, inflation, leverage effect, risk, TARCH