Volatility Dynamics of Indonesian Stock Market and Time-Varying CAPM
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초록
Reaching stellar performances over Southeast Asia region in 2009 and Asia-Pacific region in 2010, Indonesian Stock Exchange becomes more interesting to study. This study tries to test the volatility dynamics and conditional CAPM using multivariate GARCH-M model with time varying correlations on Indonesian capital market over the period 1995～2010. Most of the estimated parameters of volatility dynamics are highly significant for size-sorted portfolios and the correlation between index and asset portfolio return may vary over time for both industrial and size-ranked portfolios. But the parameter for the price of risk, (λ), has not been statistically significant for both industrial and size-ranked portfolios in Indonesia.
Abstract
Reaching stellar performances over Southeast Asia region in 2009 and Asia-Pacific region in 2010, Indonesian Stock Exchange becomes more interesting to study. This study tries to test the volatility dynamics and conditional CAPM using multivariate GARCH-M model with time varying correlations on Indonesian capital market over the period 1995～2010. Most of the estimated parameters of volatility dynamics are highly significant for size-sorted portfolios and the correlation between index and asset portfolio return may vary over time for both industrial and size-ranked portfolios. But the parameter for the price of risk, (λ), has not been statistically significant for both industrial and size-ranked portfolios in Indonesia.
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