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Source: Journal Citation ReportsTM from ClarivateTM 2022

Entrepreneurship and Sustainability Issues Open access
Journal Impact FactorTM (2022) 1.7
Journal Citation IndicatorTM (2022) 0.42
Received: 2019-03-14  |  Accepted: 2019-07-10  |  Published: 2019-09-30

Title

Multifactor on macroeconomic fundamentals to explain the behavior of sectoral indices in the Indonesian stock exchange


Abstract

The purpose of this study is to investigate the impact of macro-fundamentals using factor approach on sectoral indices in the Indonesian Stock Exchange. This study uses monthly data on the returns of sectoral indices and uses Seemingly Unrelated Regression (SUR) analysis with a multifactor model. The results show that macro-economic variables can be classified into 2 common factors; Monetary Macro Factor (MMF) and Real Macro Factor (RMF). These factors have varying effects on different sectoral indices. Due to differences in the characteristics embodied in each sector, sectors then respond differently towards the change in macroeconomic conditions in Indonesia. The MMF is dominated by variables such as BI Rate, inflation, and exchange rates, while the MRF is influenced by other variables such as foreign exchange reserves, exports, and Indonesian crude oil prices. The MMF negatively affects indexes such as basic industry and chemical, consumer goods, infrastructure, manufacturing, mining, miscellaneous industries and property and trade, while the RMF has negative effect on the mining sector. By applying regression and Principal Components approaches, the model provides higher predictive power for the price behavior in each sector. This study found that the real sector is as important as the financial sector in influencing the capital market. This demonstrates a strong connection between the real and the financial. It also shows that the Indonesian capital market is dominantly controlled by investors rather than speculators. This is of particular importance for researchers who may be considering conducting a comparison of multifactor models and other methods such as CAPM and the Five Factor Model of Fama and French.


Keywords

macroeconomic, sectoral indices, macro-fundamental, factor approach, multifactor, model of Fama and French


JEL classifications

G11 , E44


URI

http://jssidoi.org/jesi/article/352


DOI


Pages

44-51


This is an open access issue and all published articles are licensed under a
Creative Commons Attribution 4.0 International License

Authors

Kaluge, David
University of Brawijaya, Malang, Indonesia https://ub.ac.id
Articles by this author in: CrossRef |  Google Scholar

Journal title

Entrepreneurship and Sustainability Issues

Volume

7


Number

1


Issue date

September 2019


Issue DOI


ISSN

ISSN 2345-0282 (online)


Publisher

VšĮ Entrepreneurship and Sustainability Center, Vilnius, Lithuania

Cited

Google Scholar

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References