The behavior of Indonesian stock market: structural breaks and nonlinearity

This study empirically examines the behaviour of Indonesian stock market under the efficient market hypothesis framework by emphasizing on the random walk behaviour and nonlinearity over the period of April 1983 - December 2010. In the first step, the standard linear unit root test, namely the augme...

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Main Authors:	Rahmat Heru Setianto, Rahmat Heru, Abdul Manap, Turkhan Ali
Format:	Conference or Workshop Item
Language:	English
Published:	2011
Subjects:	H Social Sciences (General) HA Statistics HG4501 Stocks, investment, speculation
Online Access:	http://irep.iium.edu.my/13306/ http://irep.iium.edu.my/13306/7/FMI_Indonesia.pdf

id	iium-13306
recordtype	eprints
spelling	iium-133062013-03-25T07:30:59Z http://irep.iium.edu.my/13306/ The behavior of Indonesian stock market: structural breaks and nonlinearity Rahmat Heru Setianto, Rahmat Heru Abdul Manap, Turkhan Ali H Social Sciences (General) HA Statistics HG4501 Stocks, investment, speculation This study empirically examines the behaviour of Indonesian stock market under the efficient market hypothesis framework by emphasizing on the random walk behaviour and nonlinearity over the period of April 1983 - December 2010. In the first step, the standard linear unit root test, namely the augmented Dickey-Fuller (ADF) test, Phillip-Perron (PP) test and Kwiatkowski-Philllips-Schmidt-Shin (KPSS) test identify the random walk behaviour in the indices. In order to take account the possible breaks in the index series Zivot and Adrews (1992) one break and Lumsdaine and Papell (1997) two breaks unit root test are employed to observe whether the presence of breaks in the data series will prevent the stocks from randomly pricing or vice versa. In the third step, we employ Brock-Dechert-Scheinkman (BDS) test to examine the presence of nonlinear behaviour in Indonesian stock indices. The evidence of nonlinear behaviour in the indices, motivate us to use nonlinear unit root test procedure recently developed by Kapetanios et al. (2003) and Kruse (2010). In general, the results from standard linear unit root test, Zivot and Adrews (ZA) test and Lumsdaine and Papell (LP) test provide evidence that Jakarta Composite Index characterized by a unit root. In addition, structural breaks identified by ZA and LP test are correspond to the events of financial market liberalization and financial crisis. The nonlinear unit root test procedure fail to rejects the null hypothesis of unit root for all indices, suggesting that Jakarta Composite Index characterized by random walk process supporting the theory of efficient market hypothesis. 2011 Conference or Workshop Item PeerReviewed application/pdf en http://irep.iium.edu.my/13306/7/FMI_Indonesia.pdf Rahmat Heru Setianto, Rahmat Heru and Abdul Manap, Turkhan Ali (2011) The behavior of Indonesian stock market: structural breaks and nonlinearity. In: Seminar National Ke-3 Forum Manafemen Indonesia, November 9-10, 2011, Bandung, Indonesia. (Unpublished)
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English
topic	H Social Sciences (General) HA Statistics HG4501 Stocks, investment, speculation
spellingShingle	H Social Sciences (General) HA Statistics HG4501 Stocks, investment, speculation Rahmat Heru Setianto, Rahmat Heru Abdul Manap, Turkhan Ali The behavior of Indonesian stock market: structural breaks and nonlinearity
description	This study empirically examines the behaviour of Indonesian stock market under the efficient market hypothesis framework by emphasizing on the random walk behaviour and nonlinearity over the period of April 1983 - December 2010. In the first step, the standard linear unit root test, namely the augmented Dickey-Fuller (ADF) test, Phillip-Perron (PP) test and Kwiatkowski-Philllips-Schmidt-Shin (KPSS) test identify the random walk behaviour in the indices. In order to take account the possible breaks in the index series Zivot and Adrews (1992) one break and Lumsdaine and Papell (1997) two breaks unit root test are employed to observe whether the presence of breaks in the data series will prevent the stocks from randomly pricing or vice versa. In the third step, we employ Brock-Dechert-Scheinkman (BDS) test to examine the presence of nonlinear behaviour in Indonesian stock indices. The evidence of nonlinear behaviour in the indices, motivate us to use nonlinear unit root test procedure recently developed by Kapetanios et al. (2003) and Kruse (2010). In general, the results from standard linear unit root test, Zivot and Adrews (ZA) test and Lumsdaine and Papell (LP) test provide evidence that Jakarta Composite Index characterized by a unit root. In addition, structural breaks identified by ZA and LP test are correspond to the events of financial market liberalization and financial crisis. The nonlinear unit root test procedure fail to rejects the null hypothesis of unit root for all indices, suggesting that Jakarta Composite Index characterized by random walk process supporting the theory of efficient market hypothesis.
format	Conference or Workshop Item
author	Rahmat Heru Setianto, Rahmat Heru Abdul Manap, Turkhan Ali
author_facet	Rahmat Heru Setianto, Rahmat Heru Abdul Manap, Turkhan Ali
author_sort	Rahmat Heru Setianto, Rahmat Heru
title	The behavior of Indonesian stock market: structural breaks and nonlinearity
title_short	The behavior of Indonesian stock market: structural breaks and nonlinearity
title_full	The behavior of Indonesian stock market: structural breaks and nonlinearity
title_fullStr	The behavior of Indonesian stock market: structural breaks and nonlinearity
title_full_unstemmed	The behavior of Indonesian stock market: structural breaks and nonlinearity
title_sort	behavior of indonesian stock market: structural breaks and nonlinearity
publishDate	2011
url	http://irep.iium.edu.my/13306/ http://irep.iium.edu.my/13306/7/FMI_Indonesia.pdf
first_indexed	2023-09-18T20:22:29Z
last_indexed	2023-09-18T20:22:29Z
_version_	1777408199213711360

The behavior of Indonesian stock market: structural breaks and nonlinearity

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