Revisiting Financial Volatility in the Indonesian Islamic Stock Market: GARCH – MIDAS Approach

Introduction/main objectives: The aim of this research is to study the impact macroeconomic variables on Indonesian Islamic stock market’s volatility. Background issues: To predict volatility, daily or high-frequency data has been applied model’s explanatory with same frequency. However, when it comes as volatility drivers, low-frequency, such weekly, monthly, quarterly. current uses a model which treats equally. Novelty: This employs mixed sampling (MIDAS) model, allows from multiple frequencies be included in model. can combine returns’ monthly quarterly macro­economic data. Hence, first paper determinants Indonesia's index using GARCH-MIDAS. Research Methods: Generalized Autoregressive Conditional Heteroscedasticity GARCH-MIDAS captures short-run long-term element volatility; findings show asymmetry effect for short-term element’s result. Finding/Results: Inflation does not influence market Moreover, after 2008 crisis, shows that inflation and interest rates positively influenced Conclusion: positive suggests stocks function hedges investors long run. Further, implies Muslim use conventional benchmark investment Shari’ah-compliant instruments.