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

  • Dinh Hoang Bach Phan Monash University Malaysia
  • Thi Thao Nguyen Nguyen The University of Da Nang
  • Dat Thanh Nguyen The University of Da nang
Keywords: Stock returns, Predictability, Macro predictors, Investor utility

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.

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Published
2019-02-27
How to Cite
Phan, D., Nguyen, T. T., & Nguyen, D. (2019). A STUDY OF INDONESIA’S STOCK MARKET: HOW PREDICTABLE IS IT?. Buletin Ekonomi Moneter Dan Perbankan, 21, 465-476. https://doi.org/10.21098/bemp.v0i0.969