Volatility of returns, trading volume and the impact of macroeconomic announcements: high-frequency evidence from the Indonesian stock market

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Haryadi, Haryadi (2016) Volatility of returns, trading volume and the impact of macroeconomic announcements: high-frequency evidence from the Indonesian stock market. Other Degree thesis, Victoria University.

Abstract

A great amount of research has been undertaken into the patterns of, and the contributing factors to, the volatility of emerging equity market returns. One of the most common findings in the research is that the volatility of emerging market returns is high compared to that of developed markets. One factor contributing to the high volatility of returns in emerging markets is a lack of informational efficiency in the markets. The objective of this thesis is to examine the informational efficiency of the Indonesia Stock Exchange (IDX) by looking at the impact of the arrival of public information on the volatility of returns and investigating the relationship between trading volume, which is used as a proxy for the arrival of information, and volatility. Scheduled U.S. and Indonesian macroeconomic announcements are used as indicators for the arrival of public information. High-frequency data and an autoregressive econometric models are employed to examine the extent to which the volatility is affected by the macroeconomic announcements. Contrary to the literature, this thesis has found that, while most domestic macroeconomic announcements impact significantly on the volatility, there is no evidence that the U.S. Federal Open Market Committee announcements have an impact on volatility. In addition, the 2008 Global Financial Crisis significantly influenced the impact of macroeconomic news on the volatility of Indonesian equity market returns. This study also examines the relationship between market-wide realized volatility and trading volume of the Indonesian equity market. Trading volume has been used to indicate the arrival of new information, and its use as a proxy for information can improve understanding of the IDX’s microstructure. Consistent with the literature, this thesis reports different patterns of trading volume and returns volatility of the IDX during intraday trading. Using the Granger-causality test model, the study finds mixed results on the significance and direction of volume-volatility relationships. There are no Granger-causality relations between trading volume and volatility of returns of the Indonesian equity market during the full sample period. However, there is evidence of bi-directional causality relationships when observations are decomposed into subsample periods and days of the week.

Additional Information

Doctor of Business Administration

Item type Thesis (Other Degree thesis)
URI https://vuir.vu.edu.au/id/eprint/32237
Subjects Historical > FOR Classification > 1402 Applied Economics
Historical > FOR Classification > 1605 Policy and Administration
Historical > Faculty/School/Research Centre/Department > College of Business
Keywords markets, stock exchanges, capital market, stocks, shares, economic policy
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