OJK Working Paper Series Vol.2 2019

Abstract

Negative sentiments have increased Volatility, Uncertainty, Complexity, and Ambiguity (VUCA) in global financial markets. This raises the spillover effect, in a blink of an eye, among the global stock markets, including in Indonesia. This paper provides a comprehensive assessment of the stock return volatility spillover of 11 stock markets toward Indonesia stock return volatility. Deploying the most fit stock return volatility models, this paper reveals that the volatility of the Jakarta Composite Index (JCI) return was uniquely integrated with the stock markets in the US and Asia, amidst a surprisingly strong and persistence correlation with the stock market in Thailand. In line with the significant impact of the external volatility spillovers toward the Indonesia stock market, this paper cannot find significant evidences of Bank Indonesia policy rate, inflation, and GDP growth announcements impact to stock return volatility around the announcement days.