Cross Border Portfolio Investment and The Volatility of Stock Market Index and Rupiah's Rate | Zendy

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Cross Border Portfolio Investment and The Volatility of Stock Market Index and Rupiah's Rate

Author(s) -

Al Muntasir

Publication year - 2015

Publication title -

deleted journal

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.505

H-Index - 4

ISSN - 1410-8046

DOI - 10.21098/bemp.v17i4.504

Subject(s) - monetary economics , exchange rate , economics , volatility (finance) , portfolio , capital flows , foreign direct investment , foreign portfolio investment , foreign capital , financial economics , macroeconomics , market economy , return on investment , liberalization , open ended investment company , production (economics)

This paper use daily data during the period 2010-2014 to analyse the impact of foreign capital inflows on capital market volatility and on the volatility of Rupiah’s rate. The results shows the flow of foreign capital positively affect the Jakarta Composite Index (JCI) but not the rate of Rupiah. Using Vector Error Correction Model, this paper finds a cointegrated and dynamic relationship between the changes in foreign capital flow in Indonesia, with the JCI and the exchange rate of Rupiah against USD. Changes in the Rupiah’s rate significantly affect the foreign capital flow and the JCI, while the JCI does not significantly affect the flow of foreign capital and the changes of Rupiah’s rate.

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