The Influence of Exchange Rate and Inflation on Stock Return Volatility

Abstract

Analysis of the effect of exchange rates and inflation on volatility and stock returns on the Indonesia Stock Exchange. The stock sector to be studied is the trade, services and investment sector in the 2015-2017 period. In this case, what will be discussed about the relationship and influence of inflation and exchange rates on volatility and stock returns? Based on the results of this study, future investors are more aware of what factors influence the volatility of stock returns, so that when investing in prospective investors did not experience losses. The exchange rate is the value of a foreign currency that is converted into the agreed value of the domestic currency. The exchange rate changes every time between supply and demand of the currency. Inflation is one indicator that influences changes in stock prices and returns. Inflation is a general price increase, or inflation can also be said to be a decrease in the purchasing power of money. The higher the price increase, the lower the value of money. This must also be considered by an investor if he wants to invest. Based on the data that the volatility of all shares in the three years namely, the period of 2015 to 2017 tends to be negative.

Keywords: Exchange Rates, Inflation, Stock Return, Volatility

Jel Classification: G1, G11,  G12, G13, G14