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The Role of Speculative Factor in the Indonesian Stock Price Determination

Author

Listed:
  • Soemarso Slamet Rahardjo

    (Department of Accountancy, Faculty of Economics, Universitas Indonesia)

Abstract

This study observes the speculative element in the price determination and its mean reverting pattern. The existence of speculative element in the Indonesian stock market price determination was proven. Exponential Generalized Auto Regressive Conditional Heteroscedasticity (EGARCH) method indicates the nonstationary process of the residuals. There are systematic as well as unsystematic component embedded in the speculative behavior. Vector Error Correction Model (VECM) concludes that prices contain volatilities in the short run, but, it will revert to the mean in the long run. Investors’ behavior are neutral toward expected gain vis a vis losses in a stock trading.

Suggested Citation

  • Soemarso Slamet Rahardjo, 2015. "The Role of Speculative Factor in the Indonesian Stock Price Determination," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 61, pages 69-82, August.
    • Handle: RePEc:lpe:efijnl:201505
    as

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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Speculative; Capital Market; Shares Pricing; Demand for Shares; Investment Decision;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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