MARKET PRICE VOLATILITY, INTERNATIONAL CRUDE OIL RETURN, AND EXPORT VALUE IN INDONESIAN EQUITY MARKET

• Main Author: Intan Sari, Winda
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/72471
• Institution: Institut Teknologi Bandung

Economic development can be seen from the growth of capital market in a country. Jakarta Composite Index (JCI) is also one of the capital market in Indonesia. The investment activity in capital market is done by using shares or stocks. Stock movements are depended on many external and internal factors. World oil prices have significant impact on the stock market index movement. Three different oil markets; OPEC, WTI, and Brent, have an impact to market return in Indonesia. Export value of a country also indicates the country productivity which affects balance sheet of a country. The better balance sheet of a country, the more investors willing to invest their capital in the country. It will increase the stock trading in a country and influence the stock market return in capital market. Autoregressive Conditional Heteroskedasticity/ Generalized Autoregressive Conditional Heteroskedasticity (ARCH/ GARCH) method is applied in the research. Data gathered of the stock market price in this research referred to Jakarta Composite Index (JCI). The oil price data is referred to OPEC crude oil, WTI, and Brent. The export value of Indonesia was taken from Central Bureau of Statistics website. The data period was monthly and range from January 2004 to December 2013. The null hypotheses for both Model I and II are there is positive significant effect on OPEC crude oil price and Indonesia export value to Jakarta Composite Index. While there is negative significant effect on WTI crude oil price and Brent crude oil price to Jakarta Composite Index. The outcome of this research is that hypotheses are proven. There is a significant relationship from WTI crude oil prices, OPEC crude oil, and export value to Jakarta Composite Index. This relationship was negative from WTI crude oil, positive significant effect price of OPEC crude oil, and positive significant effect export value to stock price index. It means when the OPEC oil price increased, the price of JCI also increased. In the other hand, when the crude oil price of WTI increases, the price of JCI will decrease and when the export increases, market return will also increase. WTI is more volatile than Brent because it just need 2 months from the occurrence of information shock to give effect to the Jakarta Composite Index. WTI also explained JCI better than Brent based on the Adj. R squared score. So, WTI can be used as the good parameter in forecasting Jakarta Composite Index.