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A Study Of Indonesia’S Stock Market: How Predictable Is It?

Author

Listed:
  • Dinh Hoang Bach Phan

    (Taylor’s University)

  • Thi Thao Nguyen Nguyen

    (The University of Da Nang-University of Science and Technology)

  • Dat Thanh Nguyen

    (The University of Da Nang)

Abstract

Using monthly data from January 1995 to December 2017, this paper tests whether Indonesian stock index returns are predictable. In particular, we use eight macro variables to predict the Indonesian composite and six sectoral index returns using the feasible generalized least squares estimator. Our results suggest that the Indonesian stock index returns are predictable. However, the predictability depends not only on the macro predictor used but also on the indexes examined. Second, we find that the most popular predictor is the exchange rate, followed by the interest rate. Finally, our main findings hold for a number of robustness tests.

Suggested Citation

  • Dinh Hoang Bach Phan & Thi Thao Nguyen Nguyen & Dat Thanh Nguyen, 2019. "A Study Of Indonesia’S Stock Market: How Predictable Is It?," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 21(12th BMEB), pages 465-476, January.
    • Handle: RePEc:idn:journl:v:1:y:2019:i:sp2:p:465-476
    DOI: https://doi.org/10.21098/bemp.v0i0.969
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    More about this item

    Keywords

    Stock Returns; Predictability; Macro Predictors; Investor Utility;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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