Financial Integration between Indonesia and Its Major Trading Partners

This study examines stock market integration among the emerging stock market of Indonesia and its major trading partners (Japan, the US, Singapore and China). We employ the newly proposed autoregressive distributed lag (ARDL) approach to cointegration and recent weekly stock market data spanning from July 1998 to December 2007. The results indicate the Indonesian stock market is cointegrated with the stock markets of the US, Japan, Singapore and China. Thus, this implies that the opportunities for international investors to gain benefits from international portfolio diversification in those markets are limited. In addition, any development in Japan, the US, Singapore and China markets should be considered by the Indonesian government in making policies regarding to the stock market of Indonesia.Stock Market Integration; Portfolio Diversification; Trading Partners

REAL STOCK RETURNS, INFLATIONARY TRENDS AND REAL ACTIVITY:Evidence from Malaysia

This study explores the relationship between real stock returns and inflationary trends in the Malaysian economy. It attempts to test for the relationship between real stock return and inflation in light of Fisher hypothesis that asserts the independence of real stock return and inflation and Fauna\u27s (1981) proxy effect framework which states that the negative real stock returns-inflation is indirectly explained by a negative real economic activity-inflation and a positive real stock returns-real economic activity relationships. The finding shows that real stock returns are independent of inflationary trends in accordance with the Fisher hypothesis, which implies that the Malaysian stock market provides a good hedge against inflation. The Fauna\u27s proxy hypothesis is then tested to check for the consistency of the relationships. The positive relationship between inflation and real economic activity and the positive relationship between real stock returns and real economic activity that totally contradicts the Fama\u27s proxy hypothesis however are found, to some extent, be consistent with the explanation of conventional macroeconomic theories of the Philip\u27s curve. Keywords: ARIMA: Farna\u27s (1981) proxy effect: Fisher hypothesisinflationary trendsPhilips curvereal stock return

INTEGRATION OF STOCK MARKETS BETWEEN INDONESIA AND ITS MAJOR TRADING PARTNERS

Using Autoregressive Distributed Lag (ARDL) and Vector Autoregressive (VAR) frameworks, this study examines the integration between the emerging stock market of Indonesia and its major trading partners (i.e., Japan, the U.S., Singapore, and China). During the period of July 1998 to December 2007, the Indonesian stock market is found to be integrated with its major trading partners. Thus, this implies that there is a limited room available for investors to gain risk-reduction benefits through diversifying their portfolio in those markets. Meanwhile, in the short run, the Indonesian market responds more to shocks in the U.S. and Singapore than in Japan and China. In designing policies pertaining to its stock market, the Indonesian government should take into account any development in the stock markets of its major trading partners, particularly the U.S. and Singaporean markets

Bankruptcy Prediction Models and Stock Prices of the Coal Mining Industry in Indonesia

Various bankruptcy prediction models have been used to measure the movement of stock prices, and thus the firms’ performance. This study is aimed at empirically exploring the usefulness of the Olhson, Almant Modification, Grover, Springate, and Zmijewski models for predicting bankruptcy of the 19 coal mining companies. It also attempts to measure the effects of the scores of these bankruptcy prediction models on the stock prices of the coal mining companies in Indonesia.  The technique of analysis that used in this research is panel regression. The results of the study showed that the bankruptcy prediction scores of the Ohlson and Almant Modification were found to be the dominant prediction models that affected the stock prices of the coal companies in Indonesia. This indicates that the bankruptcy prediction model can be used as one of the approaches to measure the movement of stock prices and performance of the coal mining companies in Indonesia.DOI: 10.15408/etk.v17i1.655

Accounting and Accountability in Religious Organizations: An Islamic Contemporary Scholars’ Perspective

The purpose of this article is to discuss the views and opinions of contemporary Muslim scholars on organisational accountability in Islam. The paper is based on in-depth semi-structured interviews and a review of the relevant documents. Eighteen interviews with twelve Muslim scholars, two ulamas (mufti), two organisational donors, and two relevant government officers, both in Indonesia and in Malaysia were, respectively, conducted. The Muslim scholars interviewed perceived that accounting and accountability activities are not contradictory to Islamic teachings. The accountability relationship in Islam is  viewed as not only fulfilling the legal requirements, but also fulfilling the relationship with God. The findings clearly indicate that a formal accountability mechanism is strongly encouraged in Islam, and financial reporting is viewed as essential in enhancing the accountability of Islamic religious organizations. Therefore, any organization dealing with community funds must demonstrate its financial accountability formally; i.e., through written reports. Thus, public or community trust in the organisation cannot replace the accountability mechanism

Financial Integration between Indonesia and Its Major Trading Partners

This study examines stock market integration among the emerging stock market of Indonesia and its major trading partners (Japan, the US, Singapore and China). We employ the newly proposed autoregressive distributed lag (ARDL) approach to cointegration and recent weekly stock market data spanning from July 1998 to December 2007. The results indicate the Indonesian stock market is cointegrated with the stock markets of the US, Japan, Singapore and China. Thus, this implies that the opportunities for international investors to gain benefits from international portfolio diversification in those markets are limited. In addition, any development in Japan, the US, Singapore and China markets should be considered by the Indonesian government in making policies regarding to the stock market of Indonesia

Dynamic linkages among ASEAN-5 emerging stock markets

Purpose – The purpose of this paper is to empirically explore market integration among five selected Association of Southeast Asian Nations (ASEAN) emerging markets (Malaysia, Thailand, Indonesia, the Philippines and Singapore) during the pre- and post-1997 financial crisis periods. Design/methodology/approach – Employs two-step estimation, cointegration and generalized method of moments (GMM). Findings – The study finds that the stock markets in the ASEAN region are cointegrated both during the pre- and post-1997 financial crisis. However, the markets are moving towards a greater integration, particularly during the post-1997 financial crisis. Finally, as measured by the error correction terms, except the emerging market of Indonesia, all other ASEAN markets appear to be the important bearers of short-run adjustment to a shock in the long-run equilibrium relationships in the region both during the pre- and post-crisis periods. Research limitations/implications – The study only focuses on stock markets of the five founding members of ASEAN, i.e. Malaysia, Indonesia, Thailand, Singapore and the Philippines. Practical implications – The paper reveals that unlike during the pre-crisis period, the long-run diversification benefits that can be earned by investors across the ASEAN markets in the post-crisis period tend to diminish. Originality/value – The study is among the first to use two-step estimation, cointegration and GMM to re-examine market integration either in the emerging or developed markets

THE SHORT- AND LONG-RUN RELATIONSHIP IN INDONESIAN ISLAMIC STOCK RETURNS

This paper aims at empirically examining the short-run and long-run causal relationship between the Indonesian Islamic stock returns and selected macroeconomic variables namely inflation, money supply and exchange rate during the pre- and post- 2008 global financial turmoil period from 2002 until 2007 and from 2008 until 2013 by using monthly data. The methodology used in this study is time series econometric techniques i.e. the unit root test, cointegration test, error correction model (ECM) and variance decompositions (VDCs). The findings showed that there is cointegration between Islamic stock prices and macroeconomic variables. The results suggest that inflation, money supply, and exchange rate significantly affected the Islamic stock returns in Indonesia. These variables should be taken into account by the policy makers as the important policy instruments in stabilizing Islamic stock markets in the country.DOI: 10.15408/aiq.v8i1.1863</p

REAL STOCK RETURNS, INFLATIONARY TRENDS AND REAL ACTIVITY: Evidence from Malaysia

This study explores the relationship between real stock returns and inflationary trends in the Malaysian economy. It attempts to test for the relationship between real stock return and inflation in light of Fisher hypothesis that asserts the independence of real stock return and inflation and Fama’s (1981) proxy effect framework which states that the negative real stock returns-inflation is indirectly explained by a negative real economic activity-inflation and a positive real stock returns-real economicactivity relationships. The finding shows that real stock returns are independent of inflationary trends in accordance with the Fisher hypothesis, which implies that the Malaysian stock market provides a good hedge against inflation. The Fama’s proxy hypothesis is then tested to check for the consistency of the relationships. The positive relationship between inflation and real economic activity and the positive relationship betweenreal stock returns and real economic activity that totally contradicts the Fama’s proxy hypothesis however are found, to some extent, be consistent with the explanation of conventional macroeconomic theories of the Philip’s curve