Browse > Article
http://dx.doi.org/10.13106/jafeb.2021.vol8.no1.001

Determinants and Prediction of the Stock Market during COVID-19: Evidence from Indonesia  

GOH, Thomas Sumarsan (Faculty of Economics, University of Methodist Indonesia)
HENRY, Henry (University of North Sumatra)
ALBERT, Albert (University of GadjahMada)
Publication Information
The Journal of Asian Finance, Economics and Business / v.8, no.1, 2021 , pp. 1-6 More about this Journal
Abstract
This research examines the stock market index determinants and the prediction using the FFT curve fitting of the Jakarta Stock Exchange (JKSE) Composite Index during the COVID-19 pandemic. This paper has used daily data of Jakarta Stock Exchange (JKSE) Composite Index, interest rate, and exchange rate from 15 October 2019 to 15 September 2020, and a total of 224 observations, retrieved from Indonesia Stock Exchange (IDX), Indonesia Statistics Central Bureau and Observation & Research of Taxation. The study covers descriptive statistics, multicollinearity test, hypothesis tests, determination test, and prediction using FFT curve fitting. The results unveil four fresh and robust evidence. Partially, the interest rate has affected positively and significantly the stock market index. Partially, the exchange rate has affected negatively and significantly the stock market index. The F-test result, interest rate, and exchange rate have significantly affected the stock market index (JKSE) simultaneously. Furthermore, the FFT curve fitting has predicted that the stock market fluctuates and increases over time. The results have shown a strong influence of the independent variables and the dependent variable. The value of Adjusted R-Square is 0.719, which means that the independent variables have simultaneously impacted the dependent variable for 71.9%; other factors have influenced the remaining 28.1%.
Keywords
Stock Market; Interest Rate; Exchange Rate; FFT Curve Fitting; Prediction;
Citations & Related Records
연도 인용수 순위
  • Reference
1 Das, A. (2005). Do Stock Prices and Interest Rates Possess a Common Trend? Louvain Economics Review, 71(4), 383-390. https://doi.org/10.3917/rel.714.0383   DOI
2 Davis, E. P., & Zhu, H. (2009). Commercial Property Prices and Bank Performance. The Quarterly Review of Economics and Finance, 49(4), 1341-1359. https://doi.org/10.1016/j.qref.2009.06.001   DOI
3 Davis, E. P., & Zhu, H. (2011). Bank Lending and Commercial Property Cycles: Some Cross-country Evidence. Journal of International Money and Finance, 30(1), 1-21. https://doi.org/10.1016/j.jimonfin.2010.06.005   DOI
4 Devereux, M. B. (2004). Should the Exchange Rate be a Shock Absorber?. Journal of International Economics, 62(2), 359-377. https://doi.org/10.1016/S0022-1996(03)00050-3   DOI
5 Ding, W., Levine, R., Lin, C., & Xie, W. (2020). Corporate Immunity to the COVID-19 Pandemic. National Bureau of Economic Research, Cambridge, MA. https://doi.org/10.3386/w27055   DOI
6 Doukas, J. A., Hall, P. H., & Lang, L. H. P. (2003). Exchange Rate Exposure at the Firm and Industry Level. Finance Markets Institutions & Instruments, 12(5), 291-346. https://doi.org/10.1046/j.0963-8008.2003.00001.x   DOI
7 Dzmuranova, H., & Teply, P. (2016). Why are Savings Accounts Perceived as Risky Bank Products?. Czech Republic: Prague Economic Papers, 25(5), 617-633. https://doi.org/10.18267/j.pep.578   DOI
8 Flota, C. (2014). The Impact of Exchange Rate Movements on Firm Value in Emerging Markets: The Case of Mexico. American Journal of Economics, 4(2A), 51-72. DOI: 10.5923/s.economics.201401.05   DOI
9 Hamrita, M. E., & Trifi, A. (2011). The Relationship between Interest Rate, Exchange Rate and Stock Price: A Wavelet Analysis. International Journal of Economics and Financial Issues, 1(4), 220-228.
10 Hendry, D. F. (1980). Econometrics-Alchemy or Science?. Economica, 47(188), 387-406. https://doi.org/10.2307/2553385   DOI
11 Huang, W., Mollick, A. V., & Nguyen, K. H. (2016). U.S. Stock Markets and The Role of Real Interest Rates. The Quarterly Review of Economics and Finance, 59, 231-242. https://doi.org/10.1016/j.qref.2015.07.006   DOI
12 Huet, S., Bouvier, A., Gruet, M. A., Bouvier, A., & Jolivet, E. (2004). Statistical Tools for Nonlinear Regression. New York, NY: Springer.
13 Khan, K., Zhao, H., Zhang, H., Yang, H., Shah, M. H., & Jahanger, A. (2020). The Impact of COVID-19 Pandemic on Stock Markets: An Empirical Analysis of World Major Stock Indices. Journal of Asian Finance, Economics and Business, 7(7), 463-474. https://doi.org/10.13106/jafeb.2020.vol7.no7.463   DOI
14 Lee, J. W., & Brahmasrene, T. (2018). An Exploration of Dynamical Relationships between Macroeconomic Variables and Stock Prices in Korea. Journal of Asian Finance, Economics and Business, 5(3), 7-17. http://doi.org/10.13106/jafeb.2018.vol5.no3.7   DOI
15 Lee, J. W., & Brahmasrene, T. (2020). An Exploration of Dynamical Relationships between Macroeconomic Variables and Stock Prices in Korea Revisited. Journal of Asian Finance, Economics and Business, 7(10), 23-24. https://doi.org/10.13106/jafeb.2020.vol7.no10.023   DOI
16 Ludvigson, S. C. (2004). Consumer Confidence and Consumer Spending. Journal of Economic Perspective, 18(2), 29-50. https://doi.org/10.1257/0895330041371222   DOI
17 Mallikarjuna, M., & Rao, R. P. (2019). Evaluation of Forecasting Methods from Selected Stock Market Returns. Financial Innovation, 5(40), 1-16. https://doi.org/10.1186/s40854-019-0157-x   DOI
18 Novotny, J., Bilokon, P. A., Galiotos, A., & Deleze, F. (2019). Machine Learning and Big Data with kdb+/q. Chichester, United Kingdom: Wiley. https://doi.org/10.1002/9781119404729   DOI
19 Mok, H. M. K. (1993). Causality of Interest Rate, Exchange Rate and Stock Prices at Stock Market Open and Close in Hong Kong. Asia Pacific Journal of Management, 10, 123-143. https://doi.org/10.1007/BF01734274   DOI
20 Nguyen, C. T., & Nguyen M. H. (2019). Modelling Stock Price Volatility: Empirical Evidence from the Ho Chi Ming City Stock Exchange in Vietnam. Journal of Asian Finance, Economics and Business, 6(3), 19-26. https://doi.org/10.13106/jafeb.2019.vol6.no3.19   DOI
21 Park, C-Y., Villafuerte, J., Abiad, A., Narayanan, B., Banzon, E., Samson, J. N. G., Aftab, A., & Tayag, M. C. (2020). An Updated Assessment of the Economic Impact of COVID-19. An Asian Development Bank Briefs, 133, 1-16. http://dx.doi.org/10.22617/BRF200144-2   DOI
22 Purwono, Rudi., & Yasin, M. Z. (2018). The Convergence Test of Indonesia Banking Inefficiency: Do Macroeconomic Indicators Matter? Bulletin of Monetary Economics and Banking, 21(1), 123-138. https://doi.org/10.21098/bemp.v21i1.946   DOI
23 Reilly, F. K., Wright, D. J., & Johnson, R. R. (2007). Analysis of the Interest Rate Sensitivity of Common Stocks. J. Portofolio Manage, 33(3), 85-107.   DOI
24 Rossi, S. P. S., & Malavasi, R. (2016). Financial Crisis, Bank Behaviour and Credit Crunch. Cham, Switzerland: Springer International Publishing. https://doi.org/10.1007/978-3-319-17413-6   DOI
25 Saymeh, A. A. F., & Orabi, M. M. A. (2013). The Effect of Interest Rate, Inflation Rate, GDP, on Real Economic Growth Rate in Jordan. Asian Economic and Financial Review, 3(3), 341-354.
26 Serven, L. (2003). Real Exchange Rate Uncertainty and Private Investment in Developing Countries. Review of Economics and Statistics, 85(1), 212-218. https://doi.org/10.1162/rest.2003.85.1.212   DOI
27 Sumarsan, T. (2020). Management Control System: Strategy Transformation for Competitive Advantage. Revised Edition. Jakarta, Indonesia: Campustaka.
28 Tursoy, T. (2019). The Interaction between Stock Prices and Interest Rates in Turkey: Empirical Evidence from ARDL Bounds Test Cointegration. Financial Innovation, 5, 7. https://doi.org/10.1186/s40854-019-0124-6   DOI
29 Zhao, H. (2010). Dynamic Relationship between Exchange Rate and Stock Price: Evidence from China. Research in International Business and Finance, 24(2), 103-112. https://doi.org/10.1016/j.ribaf.2009.09.001   DOI
30 Aghion, P., Bacchetta, P., Ranciere, R., & Rogoff, K. (2006). Exchange Rate Volatility and Productivity Growth: The Role of Financial Development. Journal of Monetary Economics, 56, 494-513. https://doi.org/10.1016/j.jmoneco.2009.03.015   DOI
31 Alam, M. N., Alam, M. S., & Chavali, K. (2020). Stock Market Response During COVID-19 Lockdown Period in India: An Event Study. Journal of Asian Finance, Economics and Business, 7(7), 131-137. https://doi.org/10.13106/jafeb.2020.vol7.no7.131   DOI
32 Apergis, N., & Eleftheriou, S. (2002). Interest Rates, Inflation, and Stock Prices: The Case of the Athens Stock Exchange. Journal of Policy Modeling, 24(3), 231-236. https://doi.org/10.1016/S0161-8938(02)00105-9   DOI
33 Assefa, T. A., Esqueda, O. A., & Mollick, A. V. (2017). Stock Returns and Interest Rates Around the World: A Panel Data Approach. Journal of Economics and Business, 89, 20-35. https://doi.org/10.1016/j.jeconbus.2016.10.001   DOI
34 Block, S. B., Hirt, G. A., & Danielsen, B. R. (2011). Foundations of Financial Management (14th ed.). New York, NY: McGraw Hill.
35 Braun, M., & Larrain, B. (2005). Finance and the Business Cycle: International, Inter-Industry Evidence. Journal of Finance, 60(3), 1097-1128. https://doi.org/10.1111/j.1540-6261.2005.00757.x   DOI
36 Brigham, E. F., & Houston, J. F. (2015). Fundamentals of Financial Management (12th ed.). Boston, MA: Cengage Learning.
37 Byrne, J. P., & Davis, E. P. (2005). Investment and Uncertainty in G7. Review of World Economics, 141(1), 1-32. https://doi.org/10.1007/s10290-005-0013-0   DOI
38 Cifter, A., & Ozun, A. (2008). Estimating the Effects of Interest Rates on Share Prices in Turkey Using a Multi-Scale Causality Test. Review Middle East Economic Finance, 4, 68-79. https://doi.org/10.2202/1475-3693.1069   DOI