THE IMPACT OF INFLATION RATES AND US DOLLAR EXCHANGE RATES ON INDONESIAN STOCK MARKET INDEX RETURN VOLATILITY

• Main Authors: Riko Hendrawan, Rifqi Dzakiri
• Format: Article
• Language: English
• Published: Universitas Merdeka Malang 2017-03-01
• Series: Jurnal Keuangan dan Perbankan
• Subjects: GARCH, inflation rates, investment, stock market return, US Dollar exchange rates
• Online Access: http://jurnal.unmer.ac.id/index.php/jkdp/article/view/778
• ISSN: 1410-8089; 2443-2687

This paper studied the impact of inflation rates and US Dollar exchange rates in Indonesian stock marketreturn volatility in the period of 2002-2012. Daily data of stock market return, inflation rates and US Dollarexchange rates were used to estimate the daily volatility of the stock return. The data of stock market price,inflation rates and US Dollar exchange rates were taken from Yahoo Finance, Indonesia statistics bureau andcentral bank of Indonesia, respectively. The result showed that both inflation rates and US Dollar exchangerates did not have a significant impact on the Indonesian stock market return volatility. Inflation rates contributed0.03% change in daily stock market return volatility whereas a 1% appreciation of Rupiah contributedto a 0.0000001% change in daily stock market return volatility. This research finding was different from theresult in Nigeria where Yaya’s & Shittu’s (2010) research had the same variables. Inflation rates and USDollar exchange rates were to examine the impact on Nigeria stock market index return volatility.