Do political events affect stock return volatility on Indonesian Stock Exchange

Vina Nurlita, Prima Naomi


This study has the purpose to examine the effect of political events on the volatility of stocks traded on the Indonesia Stock Exchange (IDX). Furthermore, this study also sees whether such political events also influence the shares that have direct links with the participants in presidential elections. The political event being examined was the Indonesian Presidential Election held in 2014. The researchers used the daily data on the shares of all companies listed on the Indonesia Stock Exchange (IDX) in 2014. The hypothesis testing were done using the GARCH (Generalized Auto Regressive Conditional Heteroscedasticity) estimation and its derivatives namely EGARCH (Exponential GARCH) and TARCH (Threshold GARCH). It was found that the 2014 Presidential Election asymmetrically affected stock return volatility on IDX and contrary to the leverage effect, which means that positive shocks (good news) have better influence than negative shocks (bad news). Out of all listed companies that have direct links with participants in the presidential election, 3 companies have their stock volatility affected by this Presidential Election; some with symmetric effect and some others with asymmetric effect.


stock return volatility; presidential elec-tion; Indonesia; asymmetric effect; lever-age affect; GARCH; EGARCH

Full Text:



Ahmed, A. E., & Suliman, S. Z. 2011, Modelling Stock Market Volatility Using GARCH Models Evidence From Sudan. International Journal of Business and Social Science, 2.

Ansyori, A. 2014, Maret 18. Sentimen Pasar itu Ber-nama "Jokowi Effect". Retrieved Januari 28, 2016, from

Batra, A. (2004). Stock Return Volatility Patterns in India. Working Paper No.124.

Beaulieu, M.-C., Jean-Claude, & Essaddam, N. 2006. Political Uncertaintyand stock market returns: evidence from 1995 Quebec Referendum. Canadian Journal of Economics, 621-641.

Bekaert, G., & Wu, G. 2000. Asymmetric Volatility and Risk in Equity Markets. Review of Financial Studies, 13, 1-42.

Bernhard, W., & Leblang, D. 1999. Polls and Pounds: Public Opinion and Exchange Rate Be-havior in Britain. Annual Meeting of The American Political Science Association. At-lanta: GA.

Bialwoski, J., Gottschalk, K., & Wisniewski, T. P. 2008. Stock Market Volatility Around National Election. Journal of Banking and Finance, 32, 1941-1953.

Campbell, J. Y., Andrew, W. L., & MacKinlay. 1997. The Econometrics of Financial Markets. New Jersey: Princeton Universty Press.

Chan, K., & Fong, W. 2000. Trade Size, Ordelimbal-ance, and the Volatility Volume Relation. Journal of Financial Economics, 57, 247-273.

Chien, YiLi, Cole, H., & Lustig, H. 2012. Is the Volatility of the Market Price of Risk Due to Intermitten Portfolio Rebalancing? American Economic Review, 2859-96.

Dritsaki, M., Ditsaki, C., & Adamopoulos, A. 2004. A Causal Relationship between Trade, Foreign Direct Investment and Economic Growth for Greece. American Journal of Applied Sciences, 230-235.

Engle, R. F. 1982. Autoregressive Conditional Hetero-scedasticity with the estimates of the variance of United Kingdom inflation. Econometrica, 987-1007.

Gerlach, S., Ramasway, S., & Scatigna, M. 2006. 150 years of financial market volatility. BIS Quarterly Review, September.

Goodell, J., & Vahama, S. 2013. US Presidential Elec-tions and implied volatility. Journal of banking and Finance, 633-650.

Hien, M. T. 2008. Modelling and Forecasting Volatili-ty by GARCH Type Models: The Case of Vietnam Stock Exchange. Disertation in Finance and In-vestment.

Hull, J. C. 2000. Option, Futures and other derevatives. New Jersey: Prentice Hall.

Jones, C. P., & Wilson, J. W. 1989. Is Stock Price Vol-atility Increasing? Financial Analysis Journal, 20-26.

Khalid, M. A., & Rajaguru, G. 2010. The Impact of Political events of financial market voaltility: Evidence using a Markov Switching Process. Bond: Globalisation and Development Centre, Bond University. 2014, Juni 8. Hary Tanoe Ungkap Alasan Dukung Prabowo-Hatta. Retrieved from Harian Kompas:

Kulwarothai, T. 2013. The Effect of Political Risk on The Volatility of Stock Return: Evidence from Thailand. Bangkok: Faculty of Commerce and Accountancy Thammasat University.

Laopodis, N. T. 2003. International Interest rate linkages: implications of monetary policy. Managerial Finance, 1-16.

Lobo, B., & Tufte, D. 1998. Exchange rate volatility: does politics matter? Journal of Macro Economics, 351-365.

Manurung, A. H., & Nugroho, W. I. 2005. Pengaruh Variabel Makro terhadap Hubungan "Conditional Mean and Conditional Volatility”. Manajemen Usahawan , 13-22.

Martinez, J., & Santiso, J. 2003. Financial Markets and Politics: The Confidence Game in Latin Amer-ican Emerging Economies. International Politi-cal Science Review 24, 363-395. 2014, Juli 11. 4 Analisa Saham MNC & VIVA Anjlok Karena Tayangan Prabowo Me-nang. Retrieved Januari 27, 2016, from

Nadeu, R., Lewis-Beck, M. S., & Belanger, E. 2011. Economic and Elections. 6th Europian Consortium for Political Research General Conference. Reykjavik.

Nelson, D. 1991. Conditional heteroscedasticity in asset returns: A new approach. Econometrica, 59, 139-162.

Ong, T. S., Soh, W. N., Teh, B. H., & Ng, S. H. 2015. Stock Return, Currency and General Elections. Pertanika Journal of Social Science & Human-ities, 237-250.

Paneta, F. 2006. The Recent Behaviour of Financial Market Volatility. BIS Papers No.29.

Pantzalis, C., Stangeland, D., & Turtle, H. 2000. Political elections and resolution of uncertainty: the international evidence. Journal of Banking and Finance, 1575-1604.

Pritsker, M. 2005. Large Investor: implications for equilibrium asset returns, shock absoption, and liquidity. Boston: Bord of Governor of the Federal Reserve System.

PT MNC Investama Tbk. 2014. Laporan Keuangan Konsolidasian untuk Tahun-Tahun yang Berakhir 31 Desember 2014 dan 2013 dan Laporan Audi-tor Independen. Jakarta: PT MNC Investama Tbk.

Schwert, G. W. 1989. Why Does Stock Market Volatil-ity Change Over Time? Journal of Finance, 44, 1115-1153.

Schwert, G. W., & Smith, C. W. 1992. Empirical Research in Capital Market. Mc Graw Hill.

Sekaran, U. 2006. Metodologi Penelitian Untuk Bisnis, Edisi 4. Jakarta: Salemba.

Stovall, R. H. 1992. Forecasting Stock Market Perfor-mance via the Presidential Cycle. Financial Analysis Journal, 5-8.

Sukamulja, S. 2004. Good corporate governance di sektor keuangan: dampak GCG terhadap kinerja perusahaan (kasus di Bursa Efek Jakarta). BENE-FIT.

Tucker, P. M. 2005. Where are the Risks? London: Remarks at the Euromoney Global Borrowers and Investor Forum.

Vuchelen, J. 2003. Electoral System and The Effects of Political Events On The Stock Market: The Bel-gian Case. Economics and Politics, 15, 85-102.

Wang, Y. H., & Lin, C. T. 2007. The Political Uncer-tainty and Stock Market Behavior in Emerging Democracy: The Case of Taiwan. Springer.

Wibowo, B. 2004. Pengujian Tuntas atas Anomali Pola Harian Effek Akhir Pekan pada Return dan Volatilitas IHSG dan LQ45 (1994-2004). Jurnal Manajemen Usahawan Indonesia.

Zan, S., & Wei, C. 2003. The Macro Economic Determinants of Stock Price Volatility. Evidence from Taiwan, South Korea, Singapore and Hongkong. 114-134.



  • There are currently no refbacks.

Copyright (c) 2019 Journal of Economics, Business & Accountancy Ventura

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.

Abstracting & Indexing



Hasil gambar untuk ccbyncsa

Copyright @ 2010 Pusat Penelitian dan Pengabdian Masyarakat Sekolah Tinggi Ilmu Ekonomi (PPPM STIE)