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Predictability, Price Bubbles, and Efficiency in the Indonesian Stock-Market

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  • Fahad Almudhaf

Abstract

I examine the return predictability of the Indonesian stock-market during 1984–2016, in rolling windows, using an automatic portmanteau test and an automatic variance ratio. I find that the market’s efficiency and predictability vary over time—consistent with the adaptive market hypothesis—with returns being less predictable in recent periods, a sign of improving efficiency. I also find that a simple buy-and-hold investment strategy outperforms several technical trading rules, even after adjusting for risk. Furthermore, I find evidence of explosive behaviour in Indonesian stock prices and detect multiple bubbles, using sequential right-tailed unit-root tests.

Suggested Citation

  • Fahad Almudhaf, 2018. "Predictability, Price Bubbles, and Efficiency in the Indonesian Stock-Market," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 54(1), pages 113-124, January.
    • Handle: RePEc:taf:bindes:v:54:y:2018:i:1:p:113-124
    DOI: 10.1080/00074918.2017.1311007
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    Cited by:

    1. Dwipraptono Agus Harjito & Md. Mahmudul Alam & Rani Ayu Kusuma Dewi, 2021. "Impacts of International Sports Events on the Stock Market: Evidence from the Announcement of the 18th Asian Games and 30th Southeast Asian Games," Post-Print hal-03538176, HAL.
    2. M. Mallikarjuna & R. Prabhakara Rao, 2019. "Evaluation of forecasting methods from selected stock market returns," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 5(1), pages 1-16, December.

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