A STUDY OF INDONESIA’S STOCK MARKET: HOW PREDICTABLE IS IT?

Dinh Hoang Bach Phan (), Thi Thao Nguyen Nguyen () and Dat Thanh Nguyen ()
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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

Bulletin of Monetary Economics and Banking, 2019, vol. 21, issue 12th BMEB Call for Papers Special Issue, 465-476

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.

Keywords: Stock Returns; Predictability; Macro Predictors; Investor Utility (search for similar items in EconPapers)
JEL-codes: G12 G17 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:idn:journl:v:1:y:2019:i:sp2:p:465-476

DOI: 10.21098/bemp.v0i0.969

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