The Influence of Global Stock Indices, World Commodity Prices, and Global Economic Policy Uncertainty on the Composite Stock Price Index

Abstract

Stock investment has become the most popular investment among investors in the capital market. Information regarding the movement of a selected group of stock prices based on certain criteria and evaluated periodically is included in the stock market index. The index that represents the historical movement of all listed stock prices on the Indonesia Stock Exchange is called the Composite Stock Price Index (CSPI). The performance of the CSPI is influenced by several external factors and changes in macroeconomics. This research aims to provide empirical evidence on the influence of these factors, which consist of the global stock index, world commodity prices, and global economic policy uncertainty, on the CSPI. The sampling method used in this research is purposive sampling technique. The population of this study includes global stock indices, world commodity prices, and global economic policy uncertainty. The samples selected for this study are STI, HSI, DJIA, SSEC, N225, world oil prices, world gold prices, US’s EPU, China’s EPU, and Japan’s EPU. The data analysis technique used in this study is the Vector Error Correction Model (VECM) with Eviews 10. The VECM model was chosen because there is cointegration among two or more variables. The analysis results provide evidence that all variables, namely STI, HSI, DJIA, SSEC, N225, world oil prices, world gold prices, US’s EPU, China’s EPU, and  Japan’s EPU, have a significant influence on CSPI in the long run. Negative   influence on CSPI during the research period of 2017-2022 is obtained from STI, world gold prices, China economic policy uncertainty, and Japan economic policy    uncertainty. Positive influence on CSPI during the research period of 2017-2022 is obtained from HSI, DJIA, SSEC, N225, world oil prices, and US economic policy uncertainty.

Keywords: CSPI, World Commodity Prices, Economic Policy Uncertainty, Contagion Effect, Vector Error Correction Model

DOI: 10.7176/RJFA/14-13-06

Publication date:July 31^st 2023