Commodity Price Volatility and Jakarta Composite Index Volatility: Evidence from the Indonesia Stock Exchange

Abstract

This study aims to analyze the impact of crude oil, coal, and gold price volatility on the volatility of the Jakarta Composite Index (JCI) on the Indonesia Stock Exchange during 2018-2025. While numerous prior studies have examined the relationship between commodity prices and the JCI, most have focused on price changes and employed linear regression approaches. Research regarding the simultaneous volatility transmission from multiple global commodities to the JCI remains limited and has yielded inconsistent results. This study addresses this gap by analyzing the volatility of crude oil, coal, and gold using an ARCH-family approach over a period characterized by various episodes of global uncertainty. The study uses daily secondary data on WTI crude oil, Newcastle coal, the London Gold Fixing, and the JCI, sourced from Investing.com and Yahoo Finance. GARCH, TARCH, IGARCH, and EGARCH models were tested, with TARCH selected as the best-fitting model based on AIC, SIC, and log-likelihood criteria. The results indicate that the volatility of crude oil and gold has a positive and significant impact on JCI volatility, whereas coal volatility does not have a significant effect. Theoretically, this study enriches the volatility spillover literature by demonstrating that volatility transmission varies across commodities. From a practical perspective, the volatility of oil and gold can serve as indicators for monitoring risk in the Indonesian stock market. Keywords: Coal, JCI, Oil, TARCH, Volatility