Price Index Modeling and Risk Prediction of Sharia Stocks in Indonesia

Hersugondo Hersugondo, Imam Ghozali, Eka Handriani, Trimono Trimono and Imang Dapit Pamungkas
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Hersugondo Hersugondo: Department Management, Diponegoro University, Semarang 50271, Indonesia
Imam Ghozali: Department Accounting, Diponegoro University, Semarang 50271, Indonesia
Eka Handriani: Department Management, Universitas Darul Ulum Islamic Centre Sudirman Guppi, Semarang 50514, Indonesia
Trimono Trimono: Department Data Science, Universitas Pembangunan Nasional “Veteran” Jawa Timur, Surabaya 60294, Indonesia
Imang Dapit Pamungkas: Department Accounting, Dian Nuswantoro University, Semarang 50131, Indonesia

Economies, 2022, vol. 10, issue 1, 1-13

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.

Keywords: Sharia investment; Jakarta Islamic Index (JKII) price; loss risk; geometric Brownian motion; Value at Risk (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2022
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