Open AccessThe Effect of Crude Oil Price Shocks on Indonesia Stock Market Performance
Author(s) -
Indra Darmawan,
Hermanto Siregar,
Dedi Budiman Hakim,
Adler Haymans Manurung
Publication year - 2020
Publication title -
jurnal organisasi dan manajemen
Language(s) - English
Resource type - Journals
eISSN - 2442-9155
pISSN - 2085-9686
DOI - 10.33830/jom.v16i1.785.2020
Subject(s) - cointegration , stock market , economics , crude oil , monetary economics , oil price , stock (firearms) , error correction model , vector autoregression , cost price , econometrics , financial economics , biology , mechanical engineering , paleontology , horse , petroleum engineering , engineering
The main purpose of this study is to observe the effects of the crude oil price shocks on Indonesia stock market performance to complete the literature on Indonesia stock market behavior. We examined the effects of the crude oil price shocks on Indonesia stock market performance through the cointegration relationship mechanism between IHSG and the crude oil price and between IHSG and the global stock market indices. The Brent crude oil price data taken from FRED economic data, the Federal Reserve Bank of St.Lois, and the stock market indices data taken from yahoo.finance.com. By using a vector error correction model (VECM) approach, we found that IHSG has significant long-run relationships with the crude oil price and the global stock market indices. This finding indicates that the effects of the crude oil price shocks on IHSG transmitted directly through the cointegration mechanism between IHSG and the crude oil price, and indirectly through the cointegration mechanism between IHSG and the global stock market indices.