How is The Volatility of Jakarta Islamic Index Stocks?
Abstract: The Jakarta
Islamic Index (JII) is the Islamic Index in Indonesia which is based on Sharia
compliance, changes in market capitalisation and liquidity. This objective of
the present study is to measure volatility of JII stocks and compare it with non-JII
during 2005-2012 by using ARCH and GARCH models. The previous studies just
comparing JII with other indices, a valid conclusion cannot be drawn as most of
stocks belonging to JII are also included in the other indices. Therefore in
this study we split stocks listed in Indonesian stock exchange into two
periods: 2005-2007 which consists of two groups: JII and Non-JII and 2008-2012
which consists of three groups: JII, Sharia and Non-Sharia based on industry sector
in order to investigate which one has the lowest volatility. This study uses
two proxies of liquidity for each period namely: turnover and spread due to we
use CAPM extended Fama and French and also augmented liquidity to calculate excess
return. In the period of 2008-2012 found that there is GARCH (1,0) in which
ARCH influences the volatility of return. Additionally, dummy-JII and dummy-Sharia
influence negative significantly toward volatility of return as well. This
finding also revealed that JII stocks have lower volatility compared to non-JII
in which JII has the lowest leverage compared to Sharia and Non-Sharia.
Therefore this result is consistent with the theory in which JII stocks has the
lowest volatility due to their characteristic which is Sharia compliance, high
market capitalization and high liquidity.
Key words: JII,
volatility, matching data.
Penulis: ERNA
LISTYANINGSIH, CHANDRASEKHAR KRISHNAMURTI
