The Importance of the Relationship

Oct 13, 2025 by magicalceylontours.com 47 views

Analysis of the Canonical Relations of the Global and Macroeconomic Index with the Indonesian Capital Market Index

Introduction

The Indonesian capital market, represented by the Indonesia Stock Exchange (IDX), plays a vital role in providing investment opportunities for both individual and institutional investors. With 11 types of stock price indexes disseminated through various media, these indexes serve as guidelines for investors in making informed investment decisions. The development of the Indonesian capital market, particularly through the LQ45 index and the JCI index, has a close relationship with the global index and macroeconomic indicators. This study aims to analyze the canonical relations between the global index, including the Dow Jones and EIDO index, as well as macroeconomic factors such as the rupiah exchange rate and SBI interest rates, on the Indonesian Capital Market Index (LQ45 and CSPI).

Methodology

The sample used in this study included a period between 2011 and 2013, with a total of 36 months of observation. The analysis method applied is canonical correlation analysis, with a significance level set at 5%. This method is used to examine the relationship between two sets of variables, in this case, the global index and macroeconomic indicators with the Indonesian capital market index.

Results

The results of the canonical correlation analysis showed that the global index and macroeconomic indicators had a significant influence on the Indonesian capital market index. The perfect canonical coefficient is found for the LQ45 index, which is 1.00, while for the JCI is almost perfect with a coefficient of 0.98. This indicates that there is a significant positive relationship between the Dow Jones index, EIDO, the rupiah exchange rate, and the SBI interest rate on the LQ45 and CSPI index during the period under study.

Individual Relationships

In more detail, the individual relationships of these indexes show that the Dow Jones index has a coefficient of 0.67, EIDO 0.54, and the rupiah exchange rate is 0.37. This means that if the values in the three indexes increase, then LQ45 and CSPI will also increase. Conversely, when the index-index values decrease, LQ45 and CSPI will follow the same decline trend. However, the SBI interest rate shows a different pattern with a negative coefficient of -0.29. This shows that when the SBI interest rate increases, there will be a decline in LQ45 and CSPI, and vice versa, if the SBI interest rates are low, then the two capital market indexes tend to rise.

The Importance of the Relationship

The relationship between the global index and macroeconomic indicators with the Indonesian capital market shows how sensitive the capital market is to fluctuating these variables. Investors need to understand that global situations and local macroeconomic conditions can greatly affect their investment decisions. For example, fluctuations in the rupiah exchange rate can be an indicator of wider economic stability, which in turn will affect the investment attractiveness of the capital market. The existence of SBI interest rates also gives an overview of the monetary policy implemented by the government, where high interest rates tend to reduce investment interest in the stock market.

Conclusion

In conclusion, this research confirms that there is a significant relationship between the global index and macroeconomic indicators with the Indonesian capital market index. This shows that to increase investment understanding and strategy, investors need to consider not only the dynamics of the domestic market but also the situation and trends that occur at the global level. Thus, a holistic and responsive investment approach to various factors that affect the market can provide more optimal benefits for investors in the Indonesian capital market.

Recommendations

Based on the findings of this study, the following recommendations are made:

Investors should consider the global index and macroeconomic indicators when making investment decisions in the Indonesian capital market.
The government should implement policies that take into account the impact of global conditions and macroeconomic indicators on the capital market.
The Indonesia Stock Exchange (IDX) should provide more information and analysis on the global index and macroeconomic indicators to help investors make informed decisions.

Limitations

This study has several limitations that should be noted:

The sample period used in this study is limited to 36 months, which may not be representative of the entire period.
The analysis method used in this study is canonical correlation analysis, which may not capture all the relationships between the variables.
The study only focuses on the Indonesian capital market and does not consider other markets.

Future Research Directions

Future research directions include:

Examining the relationship between the global index and macroeconomic indicators with other markets, such as the US and European markets.
Investigating the impact of global conditions and macroeconomic indicators on the Indonesian capital market during different periods.
Developing a more comprehensive model that includes other factors that affect the capital market.

Conclusion

In conclusion, this study provides evidence of the significant relationship between the global index and macroeconomic indicators with the Indonesian capital market index. The findings of this study have important implications for investors, policymakers, and the Indonesia Stock Exchange (IDX). By considering the global index and macroeconomic indicators, investors can make more informed decisions and achieve better investment outcomes.
Frequently Asked Questions (FAQs) about the Analysis of the Canonical Relations of the Global and Macroeconomic Index with the Indonesian Capital Market Index

Q: What is the purpose of this study?

A: The purpose of this study is to analyze the canonical relations between the global index, including the Dow Jones and EIDO index, as well as macroeconomic factors such as the rupiah exchange rate and SBI interest rates, on the Indonesian Capital Market Index (LQ45 and CSPI).

Q: What is canonical correlation analysis?

A: Canonical correlation analysis is a statistical method used to examine the relationship between two sets of variables. In this study, it is used to analyze the relationship between the global index and macroeconomic indicators with the Indonesian capital market index.

Q: What are the key findings of this study?

A: The key findings of this study are that the global index and macroeconomic indicators have a significant influence on the Indonesian capital market index. The perfect canonical coefficient is found for the LQ45 index, which is 1.00, while for the JCI is almost perfect with a coefficient of 0.98.

Q: What does the coefficient of 0.67 for the Dow Jones index mean?

A: The coefficient of 0.67 for the Dow Jones index means that if the value of the Dow Jones index increases, then the LQ45 and CSPI indexes will also increase. Conversely, if the value of the Dow Jones index decreases, then the LQ45 and CSPI indexes will also decrease.

Q: What does the negative coefficient of -0.29 for the SBI interest rate mean?

A: The negative coefficient of -0.29 for the SBI interest rate means that if the value of the SBI interest rate increases, then the LQ45 and CSPI indexes will decrease. Conversely, if the value of the SBI interest rate decreases, then the LQ45 and CSPI indexes will increase.

Q: What are the implications of this study for investors?

A: The implications of this study for investors are that they should consider the global index and macroeconomic indicators when making investment decisions in the Indonesian capital market. By considering these factors, investors can make more informed decisions and achieve better investment outcomes.

Q: What are the implications of this study for policymakers?

A: The implications of this study for policymakers are that they should take into account the impact of global conditions and macroeconomic indicators on the capital market when implementing policies. By considering these factors, policymakers can make more informed decisions and achieve better economic outcomes.

Q: What are the limitations of this study?

A: The limitations of this study are that the sample period used is limited to 36 months, which may not be representative of the entire period. Additionally, the analysis method used is canonical correlation analysis, which may not capture all the relationships between the variables.

Q: What are the future research directions?

A: The future research directions include examining the relationship between the global index and macroeconomic indicators with other markets, such as the US and European markets. Additionally, investigating the impact of global conditions and macroeconomic indicators on the Indonesian capital market during different periods is also a future research direction.

Q: What are the practical implications of this study?

A: The practical implications of this study are that investors, policymakers, and the Indonesia Stock Exchange (IDX) should consider the global index and macroeconomic indicators when making investment decisions and implementing policies. By considering these factors, they can make more informed decisions and achieve better investment and economic outcomes.