Abstract
The objective of this study is to measure the response from Indonesia Shari’ah compliance stock index toward macroprudential and monetary policy of Bank Indonesia. The measurement of responses is important to examine the efficiency of Shari’ah stock market and policy efficiency based on market reaction from investors that is described in the stock prices. The measurement of Shari’ah compliance stock index response is using standard event study approach by assessing market speed of price adjustment toward information releases which continue with testing whether abnormal returns are significantly different from zero during the time of the event window. The results suggest that Indonesia Shari’ah compliance stock index needs less than one min to adapt and absorb the 36 macroprudential and monetary policies of Bank Indonesia. The results also indicate that there should be separate trading system between conventional and Shari’ah capital market to eliminate the probability of Shari’ah compliance having the same impact to conventional stock market toward volatilities of macro- and microeconomic condition.
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Notes
- 1.
Authors do not rule out alternative explanations such as (1) the presence of noise trading; (2) investors delayed reaction to news on previous day, which takes them several days to grasp its impact; and (3) the reaction to news only known by informed investors.
- 2.
Market price is very important; in Shari’ah perspective the price must reflect the real current condition of company which issued a stock, Thus the more volatile the market, the more it will influence the condition of Shari’ah compliance that can definite the transparency of company that classified in Shari’ah compliance and in the end it will determine the development of Shari’ah compliance.
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Malini, H. (2016). Indonesia Shari’ah Compliance Stock Index Responses Toward Macroprudential and Monetary Policy of Indonesian Central Bank. In: Zulkhibri, M., Ismail, A., Hidayat, S. (eds) Macroprudential Regulation and Policy for the Islamic Financial Industry. Springer, Cham. https://doi.org/10.1007/978-3-319-30445-8_13
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DOI: https://doi.org/10.1007/978-3-319-30445-8_13
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