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Cross Border Portfolio Investment And The Volatility Of Stock Market Index And Rupiah’S Rate

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  • Al Muntasir

    (University of Gadjah Mada)

Abstract

This paper use daily data during the period 2010-2014 to analyse the impact of foreign capital inflows on capital market volatility and on the volatility of Rupiah’s rate. The results shows the flow of foreign capital positively affect the Jakarta Composite Index (JCI) but not the rate of Rupiah. Using Vector Error Correction Model, this paper finds a cointegrated and dynamic relationship between the changes in foreign capital flow in Indonesia, with the JCI and the exchange rate of Rupiah against USD. Changes in the Rupiah’s rate significantly affect the foreign capital flow and the JCI, while the JCI does not significantly affect the flow of foreign capital and the changes of Rupiah’s rate.

Suggested Citation

  • Al Muntasir, 2015. "Cross Border Portfolio Investment And The Volatility Of Stock Market Index And Rupiah’S Rate," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 17(4), pages 403-432, April.
    • Handle: RePEc:idn:journl:v:17:y:2015:i:4b:p:403-432
    DOI: https://doi.org/10.21098/bemp.v17i4.504
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    More about this item

    Keywords

    Foreign Capital Flows; Capital Market of Volatility; Currency Exchange;
    All these keywords.

    JEL classification:

    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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