HERDING BEHAVIOR IN THE INDONESIAN ISLAMIC STOCK MARKET
Indonesia Stock Exchange provides Islamic stocks for Muslim investors who want to invest, with the first Islamic stock index in Indonesia being Jakarta Islamic Index or JII that consists of thirty of the most liquid Islamic stocks. The market capitalization of JII tends to increase every year. This...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Bank Indonesia
2019-11-01
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| Series: | Journal of Islamic Monetary Economics and Finance |
| Subjects: | |
| Online Access: | http://jimf-bi.org/index.php/JIMF/article/view/1079 |
| Summary: | Indonesia Stock Exchange provides Islamic stocks for Muslim investors who want to
invest, with the first Islamic stock index in Indonesia being Jakarta Islamic Index or JII
that consists of thirty of the most liquid Islamic stocks. The market capitalization of JII
tends to increase every year. This paper examines the presence of herding behavior in
emerging Islamic stock market of Indonesia using daily return of Indonesia Composite
Index and JII from October 6, 2000 to October 5, 2018. Herding behavior could generally
trigger shifting market prices from equilibrium values. Herding behavior may be
identified from the relation between stock return dispersion and market return. Stock
return dispersion is measured using Cross Sectional Absolute Deviation or CSAD.
Generalized Auto Regressive Conditional Heteroskedasticity or GARCH method is
used to detect herding behavior. GARCH does not see heteroskedasticity as a problem,
instead uses it to make a model. The result indicates that herding behavior exist in
Islamic stock market of Indonesia. Asymmetric herding occurs in Indonesia Islamic
stock market where herding behavior exists during falling market condition only. |
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| ISSN: | 2460-6146 2460-6618 |