VOLATILITY TRANSMISSION OF FOREIGN EXCHANGE RATES AND STOCK MARKET IN INDONESIA
| Main Author: | Dewi, Primayanti |
|---|---|
| Format: | bachelorthesis doc-type Bachelors |
| Bahasa: | ind |
| Terbitan: |
, 2016
|
| Online Access: |
http://repository.unpad.ac.id/frontdoor/index/index/docId/7114 |
Daftar Isi:
- Primayanti Dewi 120210120142 Volatility Transmission of Foreign Exchange Rates and Stock Market in Indonesia The relationship between the volatility of exchange rate and stock price is an ongoing debate among financial economists. Flow-oriented and stock-oriented have been studied all over time lately and are heavily influenced by the dynamic fluctuation of foreign exchange and stock price. This research objectives are to show the transmission between volatility of exchange rate and stock prices in Indonesia and to investigate the relationship between those volatilities in Indonesia. Daily time series data of Indonesia Stock Exchange (Jakarta Composite Index) and exchange rate of Indonesia (Rupiah againts US Dollar) is used for the period of January 2000 to December 2015, Augmented Dickey Fuller (ADF) unit root test is applied to check the stationarity. ADF test results show that all variables were stationary at level. GARCH model is applied on each variable to measure the volatility. Thus the series of each variable are used for Granger causality analysis. The results of Granger causality test show a bidirectional relationship between the exchange rate volatility and the volatility of stock market prices in Indonesia. Further analysis using impulse response function and variance decomposition, indicated that Indonesia tends to follow the pattern of flow-oriented than stock-oriented. Keywords: Indonesia financial market, volatility, GARCH, VAR