Citation:

I Kadek Bellyoni Dwijaya, Abdul Azis. R, Sri Dewi Fitrianingsih, Nunung Apriani. "The Era of High Interest Rates: Sectoral Stock Price Index Volatility in Indonesia" International Research Journal of Economics and Management Studies, Vol. 3, No. 9, pp. 176-185, 2024.

Abstract:

This study aims to determine the impact of interest rate hikes on sectoral index stock prices on the Indonesia Stock Exchange; in addition, we predict the volatility of sectoral indices using monthly data for the period 2021-2024. The research method uses simple correlation to determine the impact of interest rates on sectoral index stock prices and volatility methods using ARIMA, ARCH, and GARCH to determine the best model from our analysis. Our findings show that an increase in interest rates has a significant positive impact on the finance banking sector, energy mineral sector, and utility sector. It has a negative impact on the industry sector and no significant impact on the distribution sector. The volatility modeling of the finance banking sector is ARIMA (1,1,2), the distribution sector is ARIMA (0,1,5), the industry sector is ARIMA (2,0,1), the energy mineral sector is ARCH (0,1,3). The utility sector is GARCH (1,1,0). The positive effect of interest rates shows that some sectoral indices can serve as an indication of economic strength that tends to improve; investors' response to monetary policy is not bad news, so they are more confident in investing in certain sectors.

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Keywords:

ARCH, ARIMA, GARCH, Interest Rate, Stock Index, Volatility.