Financial Liberalisation and Stock Market Volatility: The Case of Indonesia

Gregory James () and Michail Karoglou

Discussion Paper Series from Department of Economics, Loughborough University

Abstract: This paper examines the relationship between financial liberalisation and stock market volatility in Indonesia. By looking at the time series properties of the Jakarta Composite Index (JCI) we identify breaks in stock market volatility which coincide with the timing of major policy events. Our main findings are (i) a significant decrease in volatility after the "official" opening of the stock market to foreign participation; (ii) a significant increase in volatility in the year before market opening following reforms that eased entry requirements and the issuance of brokerage licenses; and (iii) a significant increase in volatility at the time of the Asian crisis followed by a significant decrease in the second and sixth years after the crisis.

Keywords: financial liberalisation; stock market volatility; Indonesia; Asian crisis. (search for similar items in EconPapers)
JEL-codes: G14 G15 (search for similar items in EconPapers)
Date: 2009-09, Revised 2009-09
New Economics Papers: this item is included in nep-fmk, nep-rmg and nep-sea
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Journal Article: Financial liberalization and stock market volatility: the case of Indonesia (2010)
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