Abstract
This study aimed to predict the JKII (Jakarta Islamic Index) price as a price index of sharia stocks and predict the loss risk. This study uses geometric Brownian motion (GBM) and Value at Risk (VaR; with the Monte Carlo Simulation approach) on the daily closing price of JKII from 1 August 2020–13 August 2021 to predict the price and loss risk of JKII at 16 August 2021–23 August 2021. The findings of this study were very accurate for predicting the JKII price with a MAPE value of 2.03%. Then, using VaR with a Monte Carlo Simulation approach, the loss risk prediction for 16 August 2021 (one-day trading period after 13 August 2021) at the 90%, 95%, and 99% confidence levels was 2.40%, 3.07%, and 4.27%, respectively. Most Indonesian Muslims have financial assets in the form of Islamic investments as they offer higher returns within a relatively short time. The movement of all Islamic stock prices traded on the Indonesian stock market can be seen through the Islamic stock price index, namely the JKII (Jakarta Islamic Index). Therefore, the focus of this study was predicting the price and loss risk of JKII as an index of Islamic stock prices in Indonesia. This study extends the previous literature to determine the prediction of JKII price and the loss risk through GBM and VaR using a Monte Carlo simulation approach.
Highlights
As the largest Muslim country globally, Islam teaching underlies Indonesian activities to fulfill their necessities of life and prepare for a better future, an investment
The following is a summary of the price movement of the Jakarta Islamic Index (JKII) index in that period, which is depicted through a time series plot: Figure 1 shows the time series plot in which the movement pattern of the JKII price index is divided into three periods
In the period 1 August 2020–1 November 2020, the JKII price index tended to be stable at IDR 500, meaning, during that period, there was no significant decrease or increase in the movement of Islamic stock prices in Indonesia
Summary
As the largest Muslim country globally, Islam teaching underlies Indonesian activities to fulfill their necessities of life and prepare for a better future, an investment. From the perspective of Islam, a good investment is an investment made based on Islamic law, and the activities carried out are not prohibited (haram). Investment based on Islamic law is known as Sharia investment (Alam et al 2017). There are two forms of Islamic investment that investors may choose: tangible assets (real assets) and financial assets. Islamic investments in financial assets tend to be more attractive to investors in Indonesia than real investment because Sharia investment in financial assets offers many benefits that may be greater than investing in tangible assets without violating Islamic Sharia (Toto et al 2020)
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