AND THEIR IMPACT ON DJIM ASEAN INDEX
By Felicia Handaya
13110090
A thesis submitted to the Faculty of
INTERNATIONAL BUSINESS AND HUMANITIES
In partial fulfillment of the requirements for the
BACHELOR’S DEGREE in
INTERNATIONAL BUSINESS ADMINISTRATION
SWISS GERMAN UNIVERSITY EduTown BSD City
Tangerang 15339 Indonesia
Revision after the thesis defense on 18 July 2014
Felicia Handaya STATEMENT BY THE AUTHOR
I hereby declare that this submission is my own work and to the best of my knowledge, it contains no material previously published or written by another person, nor material which to a substantial extent has been accepted for the award of any other degree or diploma at any educational institution, except where due acknowledgement is made in the thesis.
_____________________________________________
Felicia Handaya Date:
Approved by:
_____________________________________________
Ir. Yosman Bustaman, MBA Date:
_____________________________________________
Prof. Eric Jos Nasution, MBA, MA, PhD Date:
Felicia Handaya ABSTRACT
THE ANALYSIS OF MACROECONOMIC VARIABLES ON DJIM25, JII, AND THEIR IMPACT ON DJIM ASEAN INDEX
By Felicia Handaya Ir Yosman Bustaman, MBA
SWISS GERMAN UNIVERSITY
The purpose of this research is to analyze and identify the correlation between macroeconomic variables namely exchange rate and interest rate on Islamic stock return in Indonesia, Malaysia and ASEAN. Moreover, this study also wants to find which countries have more impact on ASEAN. The data are treated daily (five days per week) from period January 2009 to January 2014.
This research use Vector Autoregression and Granger Causality Analysis method. JII and DJIM25 show a similar result on the relationship with macroeconomic variables.
The stock indexes have a negative and not significance relationships toward interest rate, positive and significance relationships toward exchange rate. Between JII and DJIM25 show significant impact on ASEAN. However, Malaysia has bigger shock fluctuation towards DJIM ASEAN.
Keywords: Exchange Rate, Interest Rate, Islamic Index, JII, DJIM25, DJIM ASEAN, VAR, Granger Causality.
Felicia Handaya
© Copyright 2014 by Felicia Handaya
All rights reserved
Felicia Handaya DEDICATION
I would like to dedicate this thesis to my family, Mr. Yosman Bustaman, and friends who have continuously supported me, and wishing me toward the very best of me.
Felicia Handaya ACKNOWLEDGEMENTS
First and foremost, I would like to show my gratitude and thank God Almighty for the guidance and blessing to complete this thesis. I also wish to express my gratitude to those individuals, who have supported, helped, ideas and inspiration that were poured during the actual progress of this thesis:
My family, especially my parents, for their never ending support, patience and constant love for me.
My advisor, Mr. Ir. Yosman Bustaman, MBA for guiding me with your continuous ideas, critics and support to bring my thesis into completion.
My friends, for endless support, patience, care, and understanding through your priceless encouragement.
Last but not least, thank to Swiss German University for the opportunity to grow my intellectual skill and also as a person.
Felicia Handaya
Felicia Handaya TABLE OF CONTENTS
Page
STATEMENT BY THE AUTHOR ... 2
ABSTRACT ... 3
DEDICATION... 5
ACKNOWLEDGEMENTS ... 6
TABLE OF CONTENTS ... 7
LIST OF FIGURES ... 9
LIST OF TABLES ... 10
CHAPTER 1 - INTRODUCTION ... 11
1.1 Background ... 11
1.2 Research Problem ... 15
1.3 Research Objective ... 16
1.4 Significance of Study... 16
1.5 Research Questions ... 17
1.6 Limitation of Research ... 17
1.7 Research Overview ... 17
CHAPTER 2 - LITERATURE REVIEW...19
2.1 Framework of Thinking ... 19
2.2 Correlation of Foreign Exchange Rate and Interest Rate on Stock Market ... 19
2.3 Composite index ... 24
2.3.1 Indonesia Stock exchange... 24
2.3.2 Dow Jones Islamic ASEAN Index ... 28
2.3.3 Dow Jones Islamic Market Malaysia Titans 25 (DJIM25)... 29
CHAPTER 3 – RESEARCH METHODS ... 34
3.1 Research Process ... 34
3.2 Data Collection ... 35
3.3 Research Hypotheses ... 36
3.4 Tools ... 37
3.5 Time Horizon ... 37
3.6 Description of Variables ... 38
Felicia Handaya
3.7 Method of Analysis ... 38
CHAPTER 4 – RESULTS AND DISCUSSIONS ... 43
4.1 Statistic Descriptive ... 43
4.2 Stationary Test ... 48
4.3 Cointegration Test ... 49
4.4 Granger Causality Test ... 50
4.5 T-Test ... 52
4.6 Variance Decomposition Analysis ... 52
4.7 Hypothesis Result ... 55
CHAPTER 5 – CONCLUSIONS AND RECCOMENDATIONS ... 57
5.1 Conclusions ... 57
5.2 Recommendations ... 58
GLOSSARY... 60
REFERENCES ... 61
APPENDICES...65
CURRICULUM VITAE ... 84
Felicia Handaya LIST OF FIGURES
Figure 1-1Significant Developments in Islamic Finance... 14
Figure 1-2 The Development of Sharia Stock in Indonesia from Period 2007-2009 and March 2012 ... 15
Figure 2. 1 Framework of Thinking ... 19
Figure 2. 2 Peformance of DJIM25 Compare to Other Dow Jones Islamic Indexes... 29
Figure 3. 1 Research Process Diagram ... 34
Figure 4. 1 Indonesia Exchange Rate 2009 - 2014 ... 43
Figure 4. 2 Malaysia Exchange Rate 2009 - 2014 ... 45
Figure 4. 3 Comparison of Interest Rate between Indonesia and Malaysia 2009 - 2014 ... 45
Figure 4. 4 Comparison of All Stock Return 2009 - 2014 ... 46
Figure 4. 5 Analysis on Short Term Granger Causal Relationship... 51
Figure 5. 1 Result ... 58
Felicia Handaya LIST OF TABLES
Table 2. 1 Differentiations between Islamic & Conventional Capital Markets ... 27
Table 3. 1 Source of Data ... 36
Table 3. 2 Description of Variables ... 38
Table 4. 1 Descriptive Statistics Result ... 47
Table 4. 2 Test for Unit Root in Level ... 48
Table 4. 3 Test for Unit Root in First Difference ... 49
Table 4. 4 Johansen Test of Cointegration ... 49
Table 4. 5 Granger Causality Test Result ... 50
Table 4. 6 T-test Result ... 52
Table 4. 7 Result of Variance Decompositions Analysis ... 53
Table 4. 8 Hypothesis Result ... 56
