Examining the link between world oil price volatility and sectoral stock performance in Indonesia
This study examines how world oil price volatility and exchange rate fluctuations affect sectoral stock indices in Indonesia, an oil-importing emerging market. Using daily data from 2012 to 2024 and the Threshold Generalized Autoregressive Conditional Heteroscedasticity (T-GARCH) model within the fr...
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| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Taylor & Francis Group
2025-12-01
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| Series: | Cogent Economics & Finance |
| Subjects: | |
| Online Access: | https://www.tandfonline.com/doi/10.1080/23322039.2025.2535484 |
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| Summary: | This study examines how world oil price volatility and exchange rate fluctuations affect sectoral stock indices in Indonesia, an oil-importing emerging market. Using daily data from 2012 to 2024 and the Threshold Generalized Autoregressive Conditional Heteroscedasticity (T-GARCH) model within the framework of the Efficient Market Hypothesis (EMH), the study analyzes the impact of these global factors on 11 sectoral stock indices. The findings indicate that sectors closely tied to oil prices, such as energy (IDXENERGY) and property (IDXPROPERTY), benefit from rising oil prices, whereas sectors like health (IDXHEALTH) are adversely affected. This suggests that oil price volatility spills over to various sectors, necessitating the consideration of such risks in investment and policy decisions. In the long term, the results show that Indonesia’s oil price volatility is not influenced by global oil price volatility. Meanwhile, in the short term, oil price volatility significantly influences most sectors. Currency depreciation negatively affects import-reliant sectors. . Moreover, sectoral returns respond asymmetrically to oil price shocks, with negative shocks increasing volatility more than positive ones. These findings contribute to the literature by offering sector-spesific insights on how global macroeconomic variables affect emerging markets. . Overall, world oil prices fluctuations represent a market risk for the Indonesia’s stock market, consistent with EMH-based theory. |
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| ISSN: | 2332-2039 |