Contents of the volume

2021, Volume 74 - Issue 1

ISSN: 2499-8265
RSS feed citation: At RePEc
Publication date: 17 February 2021

EFFECTS OF SINO FDI ON THE GROWTH OF SUB-SAHARAN AFRICA

Emmanuel Wiafe, Lucy Anning

Read the article

CRUDE OIL PRICE MOVEMENTS AND STOCK TRADING ACTIVITY: EVIDENCE FROM INDONESIA

Indra Darmawan, Dedi Budiman Hakim, Adler Haymans Manurung, Hermanto Siregar

Read the article

THE EFFECT OF WATER CONSERVATION ON RESIDENTIAL FRESH WATER CONSUMPTION: EVIDENCE FROM KUWAIT

Ahmad Alawadhi, Sheikha Al-Fulaij, Nadia Al-Musallam, Wafa Awadh, Nadeem A. Burney, Ayele Gelan

Read the article

SHORT AND LONG RUN ASYMMETRIC EFFECTS OF MONETARY AND FISCAL POLICY UNCERTAINTY ON ECONOMIC ACTIVITY IN THE U.S.

Goodness C. Aye

Read the article

FOREIGN OWNERSHIP AND OPTIMAL DISCRIMINATORY TARIFFS UNDER OLIGOPOLISTIC COMPETITION

Chien- Hui Lee , Jen-Yao Lee, Leonard F.S. Wang

Read the article

ACKNOWLEDGEMENT TO REFEREES

Amedeo Amato

Read the article

Genoa Chamber of Commerce
Economia Internazionale / International Economics

< Back

Corresponding author

Indra DARMAWAN, School of Business, IPB University, Bogor, Indonesia and Indonesia Banking School, Jakarta, Indonesia

Co-authors

Dedi Budiman HAKIM, School of Business, IPB University, Bogor, Indonesia and Faculty of Economics and Management, IPB University, Bogor, Indonesia

Adler Haymans MANURUNG, School of Business, IPB University, Bogor, Indonesia and Faculty of Economics and Management, IPB University, Bogor, Indonesia

Hermanto SIREGAR, School of Business, IPB University, Bogor, Indonesia and Faculty of Economics and Management, IPB University, Bogor, Indonesia

Crude Oil Price Movements and Stock Trading Activity: Evidence from Indonesia

Pages

25-46

Abstract

Stock trading activity reflects the dynamic of a stock market performance and become an important indicator in its development. This study observes the effects of the crude oil price movements on Indonesia stock trading activities, measured by the Jakarta composite index (JCI), stock volume transactions (VolT), stock value transactions (ValT) and stock market capitalization (MCap). A VECM approach was used to observe its effects and concludes that the crude oil price movements have significant effects on those indicators. Impulse responses functions (IRF) analysis shows that those indicators have significant responses to the crude oil price movements, and variance decomposition (FEVD) analysis shows that crude oil price movements contribute to the variability of Indonesia stock trading activities.

JEL classification

C58, F65, G12, Q43

Keywords

Crude Oil Price Movement, Stock Trading Activity, Time Series Analysis, VECM

Index

  1. Introduction
  2. Literature review
  3. Data and methodology
  4. Results
  5. Conclusion and suggestions

Bibliography

Achsani, N.A. and H.G. Strohe (2002), "Stock Market Return and Macroeconomic Factors: Evidence from Jakarta Stock Exchange of Indonesia 1991-2001", Wirtschaft und Socialwissenschaftliche Fakultät, University Postdam.
Adam, P., U. Rianse, E. Cahyono and M. Rahim (2015), “Modeling of the Dynamics Relationship between World Crude Oil Prices and the Stock Market in Indonesia”, International Journal of Energy Economics and Policy, 5(2), 550-557.
Antonakakis, N. and G. Filis (2013), “Oil Price and Stock Market Correlation: A Time-Varying Approach”, International Journal of Energy and Statistics, 1(1), 17-29.
Asteriou, D. and S.G. Hall (2007), Applied Econometrics: A Modern Approach Using Eviews and Microfit, Rev. Ed., Palgrave Macmillan: Basingstoke.
Azeez, A.A. and Y. Yonoezawa (2006), “Macroeconomic Factors and the Empirical Content of the Arbitrage Pricing Theory in the Japanese Stock Market”, Japan and the World Economy, 18(4), 568-591.
Bandhari, L.C. (1988), “Debt/Equity Ratio and Expected Common Stock Returns Empirical Evidence”, The Journal of Finance, 43(2), 507-528.
Banz, R.W. (1981), “The Relationship between Return and Market Value of Common Stocks”, Journal of Financial Economics, 9(1), 3-18.
Basu, S. (1983), “The Relationship between Earnings’ Yield, Market Value, and Return for NYSE Common Stocks: Further Evidence”, Journal of Financial Economics, 12(1), 129-156.
Bekaert, G.,  C.R. Harvey and R.L. Lumsdaine (2002), “Dating the Integration of World Equity Markets,"  Journal of Financial Economics, 65, 203-247.
Brose Olsen, A. and P. Henriz (2014), “Oil Price Shocks and Stock Market Return: a Study on Portugal, Ireland, Italy, Greece and Spain”, Master Thesis, Lund University, Sweden.
Bursa Efek Indonesia (2019), Monthly Statistics, Indonesia, IDX Publication: Jakarta, <https://www.idx.co.id>.
Cheng, I.H. and W. Xiong (2014), “The Financialization of Commodity Markets”, Annual Review of Financial Economics, 6, 419-41.
Chris, O.I (2012) “The Impacts Of Oil Price Movement On The Nigerian Stock Market”, Ph.D. Thesis, Department of Banking and Finance, Faculty of Business Administration, University of Nigeria.
Cologni, A. and M. Manera (2008), “Oil Prices, Inflation and Interest Rates in a Structural Co-integrated VAR Model for the G-7 Countries”, Energy Economics, 30(3), 856-888.
Creti, A., M. Joëts, and V. Mignon (2012), "On the Links between Stock and Commodity Market’s Volatility," Centre D’Estudes Prospectives et D’Informations Internationales Working Paper No.2012-20.
DeBoyrie, M.E., and I. Pavlova (2016), “Linkages between Equity and Commodity Markets: Are Emerging Markets Different?”, Retrieved from: <https://acfr.aut.ac.nz/__data/assets/pdf_file/0006/56445/42984-M-deBoyrie-Linkages-between-Equity-and-Commodity-Markets.pdf>.
Filis, G.,  S. Degiannakis and C. Floros (2011), “Dynamic Correlation between the Stock Market and Oil Price: The Case of Oil-Importing and Oil-Exporting Countries”, International Review of Financial Analysis, 20(3), 152-165.
Graham, M., J. Peltomäki and V. Piljak (2016), “Global Economics Activity as an Explicator of Emerging Market Equity Return”, Research in International Business and Finance, 36, 424-435.
Gujarati, D.N. (2009), Basic Econometric, Tata McGraw-Hill Education: New Delhi.
Hersugondo, S.E., R. Robiyanto, S. Wahyudi and H. Muharam (2015), “The World Oil Price Movement and Stock Return in Several Southeast Asia’s Capital Markets”, International Journal of Applied Business and Economic Research, 13(2), 527-534.
Hetch, A. (2019), “Understanding the Crude Oil Market: Pricing Differential between Brent Crude and WT”, The Balance. Retrived from: <https://www.thebalance.com/crude-oil-brent-versus-wti-808872>.
Jung, H. and C. Park (2011),  “Stock Market Reaction to Oil Price Shock: A Comparison between an Oil-Exporting Economy and an Oil-Importing Economy”, Journal of Economic Theory and Econometrics, 22(3), 1-29.
Kang, W., R.R. Ratti and K.H. Yoon (2015), “The Impact of Oil Price Shock on the Stock Market Return and Volatility Relationship”, Journal of International Financial Markets, Institutions and Money, 34, 41-54.
Killian, L. (2008), “The Economic Effects of Energy Price Shocks”, Journal of Economic Literature, 46(4), 871-909.
Killian, L. and C. Park (2009), “The Impact of Oil Price Shock on the US Stock Market”, International Economic Review, 50(4), 1267–1287.
Koh, W.C. (2015), “Oil Price Shocks and Stock Markets in ASEAN-5”, Southeast Asian Journal of Economics, 3(1), 143-164.
Lakonishok, J., A. Shleifer, and R.W. Vishny (1994), "Contrarian Investment, Extrapolation, and Risk," The Journal of Finance, 49(5), 1541-1578.
Litzenberger, R.H. and K. Ramaswamy (1982), “The Effects of Dividends on Common Stock Price: Tax Effect or Information Effects?”, The Journal of Finance, 37(2), 429-443.
Lütkepohl, H. (2006), The New Introduction to Multiple Time Series Analysis, The Springer: Berlin and Heidelberg.
Lütkepohl, H. and H.E. Reimers (1992), “Impulse Response Analysis of Cointegrated Systems”, Journal of Economic Dynamic and Control, 16(1), 53-78.
Maghyereh, A. (2004), “Oil Price Shocks and Emerging Stock Markets: A Generalized VAR Approach”, International Journal of Applied Econometrics and Quantitative Studies, 1(2), 27-40.
Markowitz, H. (1952), “Portfolio Selection”, The Journal of Finance, 7(1), 77-91.
Masih, R., S. Peters and L. De Mello (2010), “Oil Price Volatility and Stock Price Fluctuations in an Emerging Market: Evidence from South Korea”, Energy Economics, 33(5), 975-986.
McSweneey, E.J. and A.C. Worthington (2008), “A Comparative Analysis of Oil as a Risk Factor in Australian Industry Stock Return”, Studies in Economics and Finance, 25(2), 131-145.
Mensi, W. (2019), “Global Financial Crisis and Co-Movements between Oil Price and Sector Stock Markets in Saudi Arabia: A VAR Based Wavelet”. Borsa Istanbul Review, 19(1), 24-38.
Najaf, R. and K. Najaf. (2016), “Impact of Oil Prices on the Stock Exchange of Pakistan and Malaysi”, International Journal of Academic Research in Managemen and Business, 1(1), 88-97.
Olson, E., A.J. Vivian and M.E. Wohar (2014), “The Relationship between Energy and Equity Markets: Evidence from Volatility Impulse Response Functions”, Energy Economics, 43, 297-305.
Olufisayo, A.O. (2014), “Oil Price and Stock Market: Empirical Evidence from Nigeria”, European Journal of Sustainable Development, 3(2), 33-40.
Rahmanto, F., M.H. Riga and V. Indriana (2016), “The Effects of Crude Oil Price Changes on Indonesia’s Stock Market: a Sector Investigation”, Indonesian Capital Market Review, 8, 12-22.
Robiyanto, R. (2018), “The Dynamic Correlation between ASEAN-5 Stock Markets and World Oil Price”, Jurnal Keuangan dan Perbankan, 22(2), 198-210.
Rosenberg, B., K. Reid and R. Lanstein (1985), “Persuasive Evidence of Market Inefficiency”, The Journal of Portfolio Management, 11(3), 9-16.
Ross, S.A. (1976), “The Arbitrage Theory of Capital Asset Pricing”, Journal of Economic Theory, 13(3), 341-360.
Sadorsky, P. (1999), “Oil Price Shocks, and Stock Market Activity”, Energy Economics, 21, 449-469.
Salehi, M., M.L. Dashtbayaz, M. Bahrami and H. Mosallapour (2015), “Relationship between Oil Price Fluctuations and Stock Price Index in Iran”, Investment Management and Financial Innovations, 12(4), 23-33.
Sek, S.K., Z.J. Ng and W.M. Har (2015), “Comparing the Impacts of Oil Price Shocks Across Stock Markets”, Jurnal Teknologi, 77(20), 1-7.
Setiawan, S. (2012), “Analisis Sektor Pasar Modal Indonesia Menghadapi Liberalisasi dan Integrasi ASEAN", Policy Paper No.2, Pusat Kebijakan Regional dan Bilateral, Badan Kebijakan Fiskal, Kementerian Keuangan Republik Indonesia.
Sharpe, W.F. (1964), “Capital Asset Prices: A Theory of Market Equilibrium under Condition of Risk”, The Journal of Finance, 19(3), 425-442.
Siregar, H. and B.D. Ward (2001), “Long-Run Money Demand, Long Run Spending Balance and Macroeconomic Fluctuation: Application of a Cointegrating SVAR Model to the Indonesia Macroeconomy”, Economia Internazionale/International Economics, 54(3), 401-424.
Solnik, B. (1983), “nternational Arbitrage Pricing Theory”, The Journal of Finance, 38(2), 449-457.
The Federal Reserve of St. Louis, FRED, <https://fred.stlouisfed.org/series/ DCOILBRENTEU/downloaddata>.
Yamori, N. (2011), “Co-Movement between Commodity Market and Equity Market: Does Commodity Market Change?”, Modern Economy, 2(3), 335-339.