Su iani, Su iani e al.
A icle
Explo ing he nexus be ween sec o al s ock ma ke
luc ua ions and mac oeconomics changes be o e and
du ing he COVID-19 pandemic
Cogen Business & Managemen
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Taylo & F ancis G oup
Sugges ed Ci a ion: Su iani, Su iani e al. (2024) : Explo ing he nexus be ween sec o al s ock ma ke
luc ua ions and mac oeconomics changes be o e and du ing he COVID-19 pandemic, Cogen
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Explo ing he nexus be ween sec o al s ock
ma ke fluc ua ions and mac oeconomics
changes be o e and du ing he COVID-19
pandemic
Su iani Su iani, Anabela Ba is a Co eia, Muhammad Nasi , João Xa ie Ri a,
Jumadil Sapu a & Ma io Nuno Ma a
To ci e his a icle: Su iani Su iani, Anabela Ba is a Co eia, Muhammad Nasi , João Xa ie Ri a,
Jumadil Sapu a & Ma io Nuno Ma a (2024) Explo ing he nexus be ween sec o al s ock ma ke
fluc ua ions and mac oeconomics changes be o e and du ing he COVID-19 pandemic, Cogen
Business & Managemen , 11:1, 2336681, DOI: 10.1080/23311975.2024.2336681
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Explo ing he nexus be ween sec o al s ock ma ke luc ua ions and
mac oeconomics changes be o e and du ing he COVID-19
pandemic
su iani su iania, anabela Ba is a co eiab, Muhammad nasi a, João Xa ie Ri ab,c,
Jumadil sapu ad and Ma io nuno Ma ab,c
aDepa men o economics, Facul y o economics and Business, uni e si as syiah Kuala, Banda aceh, indonesia;
bisCaL-ins i u o supe io de Con abilidade e adminis ação de Lisboa, ins i u o Poli écnico de Lisboa, Lisboa, Po ugal;
cinsigh : Piage Resea ch Cen e o ecological Human De elopmen , Lisboa, Po ugal; dDepa men o economics, Facul y o
Business, economics and social De elopmen , uni e si i Malaysia, Kuala ne us, e engganu, Malaysia
ABSTRACT
in es o s may ind i challenging o in es due o economic luc ua ions du ing
cOViD-19. his s udy aims o examine he ela ionship be ween economic luc ua ions
and he indonesian sec o al s ock ma ke in he consume goods sec o (cgi), basic
indus ial and chemical sec o (Bic), and miscellaneous indus y (Msi), bo h be o e and
du ing he cOViD-19 pandemic in indonesia. he mon hly ime-se ies da a used in he
empi ical app oach co e he pe iod om Janua y 2008 o Decembe 2020. he analysis
used o ecas e o a iance decomposi ion, ec o au o eg ession, impulse esponse
unc ion analysis, and causali y in es iga ion. he econome ic esul s showed ha
p e ious pe iod shocks in each indus ial sec o s ock ma ke had a disad an ageous
e ec on u u e s ock ma ke ea nings. addi ionally, while he cgi s ock ma ke
posi i ely a ec s he Rupiah exchange a e, he Msi indus ial sec o is nega i ely
impac ed by in la iona y p essu es. also connec ed o he Msi s ock ma ke a e
luc ua ions in in la ion. con e sely, he exchange a e a ec s Msi and cgi. Fu he mo e,
o he cgi and Bic s ock ma ke s, a one-way causa ion ela ionship is obse ed.
ano he no able esul was ha all h ee indus ial sec o s esponded posi i ely when
in la ion and exchange a es we e dis up ed. i implies ha , o con enience, in es o s
will seek ou o he a eas o he s ock ma ke . he e o e, a quick go e nmen esponse
is needed o handle he economy du ing economic luc ua ions accompanied by he
cOViD-19 pandemic so ha i does no ha e an impac on he u u e.
1. In oduc ion
in es men ac i i ies a e he backbone o de eloping economies wo ldwide. acco ding o con en ional
hinking, in es ing now p omo es u u e economic g ow h (sawulski e al., 2023). he numbe o in es -
men ac i i ies e lec s he s a e o he global economy be ween coun ies. he wo ld’s mac oeconomic
luc ua ions can be in luenced by a global shock (Fi iana e al., 2023a). cOViD-19 is one such pandemic
ha has impac ed global mac oeconomics (Fi iana e al., 2023b; Mckibbin & Fe nando, 2021). he sec-
o al economy is one o he conce ns o in es men ac i i ies (De izal e al., 2021). indonesia’s s ock
ma ke is signi ican o in es men as i ope a es wi h an open economic sys em (Muna & khadda i,
2022). he ma ke comp ises nine sec o al s ock indices, each wi h di e en indus ial ade index alue
based on he s ock ma ke capi alisa ion. he main opic o his s udy is he pe o mance o indonesia’s
sec o al s ock indices du ing he cOViD-19 pandemic and he c isis.
he e a e 35 indices on he indonesian s ock ma ke , as pe he BPs epo o 2019. One o hese is
he sec o al index, which is di ided in o 9 impo an sec o s in indonesia. he indus ial ade alue o
© 2024 he au ho (s). Published by in o ma uK Limi ed, ading as aylo & F ancis g oup.
CONTACT su iani su iani [email p o ec ed] Depa men o economics, Facul y o economics and Business, uni e si as syiah Kuala,
Da ussalam, Banda aceh, indonesia.
h ps://doi.o g/10.1080/23311975.2024.2336681
his is an open access a icle dis ibu ed unde he e ms o he C ea i e Commons a ibu ion License (h p://c ea i ecommons.o g/licenses/by/4.0/), which
pe mi s un es ic ed use, dis ibu ion, and ep oduc ion in any medium, p o ided he o iginal wo k is p ope ly ci ed. he e ms on which his a icle has been
published allow he pos ing o he accep ed Manusc ip in a eposi o y by he au ho (s) o wi h hei consen .
ARTICLE HISTORY
Recei ed 28 augus 2022
Re ised 24 Feb ua y 2024
accep ed 26 Ma ch 2024
KEYWORDS
Mac oeconomic
luc ua ions; indonesia
s ock exchange; sec o al
s ock p ice; ec o
au o eg essi e model;
coin eg a ion app oach
REVIEWING EDITOR
Mazha abbas, cholis an
Uni e si y o Ve e ina y
and animal sciences
Bahawalpu , Pakis an
SUBJECTS
Mone a y economics;
De elopmen economics;
Financial economics
2 s. sURiani e al.
each sec o in he s ock ma ke is shown in Figu e 1, which indica es ha e e y sec o has a di e en
indus ial ade alue. he inancial sec o had he highes indus ial ade alue a 35%, wi h an indus-
ial ma ke capi alisa ion o 34%. On he o he hand, he a ious indus y sec o s had he lowes indus-
ial ade alue a 4.2%, wi h an indus ial ma ke capi alisa ion o 4.4%. he in as uc u e, u ili ies, and
anspo a ion sec o s had an indus ial ade alue o 15.6%, he ade, se ice, and in es men sec o
o 13.9%, he mining sec o o 9.4%, he consume goods indus y o 8.3%, Basic and chemical indus ies
by 6.4%, and he p ope y, eal es a e, and cons uc ion sec o s by 5.5%. he di e ence in ading alue
is ela ed o he numbe o sha es ha in es o s a e in e es ed in he p ima y and seconda y ma ke s
and he associa ed isks.
Du ing a ce ain pe iod, he s ock ma ke in di e en sec o s showed luc ua ions. Figu e 1 indica ed
ha he ag icul u e sec o index was domina ing, which is e y easonable since indonesia is p ima ily
an ag icul u al coun y. On he o he hand, he p ope y sec o index had he lowes ank. i shows ha
as a de eloping coun y, indonesia is s ill p io i ising in es men in he eal sec o a he han he luxu y
sec o . in la ion is one o he indica o s ha measu e he changes in p ices o a pa icula g oup o
commodi ies con inuously o e a ce ain pe iod. he luc ua ions in in la ion can signi ican ly impac he
eal sec o . in cases o hype in la ion, communi y pu chasing powe is a ec ed, which ul ima ely impac s
he agg ega e demand and supply, leading o ma ke equilib ium.
he speed a which in la ion eaches i s equilib ium le el is called pe sis ence. he empi ical esul s
show ha he p essu e o in la iona y sou ces comes om ood commodi ies and housing, wa e , elec-
ici y, gas, and uel commodi ies. in la ion in ood consump ion can signi ican ly a ec ood secu i y
(su iani & sa iyah, 2020). Bilici and Çekin (2020) demons a es a no able ise in in la ion pe sis ence,
highligh ing he e icacy o mone a y policy in ensu ing p ice s abili y. analysis o indonesia’s in la ion
a e indica es a consis en decline since ea ly 2020.
he e en s ha anspi ed be ween July 2020 and Oc obe 2020 e ealed eal-li e condi ions ha
de ia ed om exis ing heo ies (su iani & Ridzqi, 2019). i was obse ed ha a dec ease in p ices led o
an inc ease in agg ega e demand due o he highe pu chasing powe o he people, esul ing in a ise
in na ional ou pu (g oss domes ic p oduc ). howe e , despi e his obse a ion, o icial da a eleased by
he indonesian cen al Bu eau o s a is ics on no embe 5, 2020 con i med ha indonesia had en e ed
a ecession in he hi d qua e o 2020 wi h nega i e economic g ow h con ac ed a -3.49% (YoY).
sembi ing-kemba en (2020) also explained ha he second con ac ion in he economic g ow h end
occu ed a e he second qua e o -5.32%.
he da a in Figu es 2 and 3 shows ha he g ow h end in he in la ion a e dec eases un il Oc obe
2020, and gDP g ow h also has a downwa d end o nega i e. his condi ion can occu because o he
cOViD-19 pandemic a he end o 2019 (alam e al., 2021). i s sp ead has sp ead globally in ea ly 2020
Figu e 1. he alue o indus ial ade in 9 sec o s in 2019.
cOgen BUsiness & ManageMen 3
and has an impac on sec o al s ock ma ke e u ns (aloma i e al., 2022). i mac oeconomic ac i i y is
dis up ed, he economy will no be s able. i may ha e an e ec on all mac oeconomic a iables, pa ic-
ula ly he exchange a e, which is closely ela ed o in es men ac i i ies o s ock p ices (alam &
Uddin, 2009).
Resea ch on he sec o al s ock ma ke ocuses on he connec ions be ween he ma ke and economic
g ow h (hismendi e al., 2021), policy unce ain y and he ma ke (si e al., 2021), he ma ke and pan-
demics (adekoya e al., 2022; aloma i e al., 2022), he ding beha iou (Viona e al., 2023) and he ma ke
o s ocks in he global heal h sec o (Ye & geng, 2021). Du ing he pandemic, he e ha e been signi i-
can changes in he coun y’s economy. he indus ial sec o ela ed o essen ial public needs is pa ic-
ula ly no ewo hy and p esen s an oppo uni y o en ep eneu s o gene a e p o i s, con ibu ing o
economic de elopmen (k i ikos, 2014). su i ing in c isis si ua ions like he ongoing pandemic poses a
challenge o companies ope a ing in he consump ion, basic, and miscellaneous indus ies. his s udy
ocuses on in es men ac i i ies wi hin hese sec o s’ s ock ma ke s and hei abili y o mee domes ic
communi y needs amid c ises such as cOViD-19. hough no domina ing he ma ke , his esea ch
explo es whe he hese h ee sec o s can wi hs and he challenges posed by c isis e en s and he cu -
en pandemic si ua ion.
in oday’s global economy, he compe i ion in he in es men ma ke is highe han e e . he alue
o he s ock ma ke and he capi al ma ke is o signi ican conce n o in es o s. he e o e, i is c ucial
o pay a en ion o go e nmen policies ha suppo economic de elopmen in a ious sec o s. Be o e
in es ing, i is also essen ial o conside he mac oeconomic condi ions o a coun y. i he mac oecon-
omy is s able and a ou able, i means ha he de elopmen ac i i ies in ha coun y a e sui able, which
leads o economic g ow h. On he o he hand, i mac oeconomic condi ions a e uns able, a coun y’s
economy ge s dis u bed. in la ion is one o he mac oeconomic a iables ha policymake s conside .
acco ding o a su ey on in la ion unce ain y by B each e al. (2020), in la ion isk is signi ican o nom-
inal easu y yields. i was demons a ed ha du ing he 1980s, he decomposi ion o goods was caused
by a ying in la ion and accu a e isk p emiums, which we e signi ican and posi i e. howe e , a e 2008,
hey became small and nega i e.
he in la ion a e e e s o he pe cen age change in p ices o e a gi en pe iod, usually a mon h o
a yea . his pe cen age shows how as p ices ha e inc eased du ing ha ime. in la ion measu es he
Figu e 2. in la ion a e ends in indonesia o no embe 2019 o oc obe 2020.
Figu e 3. gDP g ow h a e end om July 2017 o July 2020.
4 s. sURiani e al.
p ice changes ha happen epea edly o e ime o a g oup o goods. in la iona y changes can ha e a
nega i e impac on he eal economy. in case o hype in la ion, i can signi ican ly a ec he pu chasing
powe o he communi y as a whole. i a ec s he agg ega e demand and ul ima ely a ec s he agg e-
ga e supply o achie e ma ke equilib ium. he speed a which in la ion mo es owa ds i s equilib ium
le el is e e ed o as i s pe sis ence.
he p e ious discussion abou sec o al s ock ma ke s and s ock ma ke eac ion has been ca ied ou by
se e al esea che s, such as hismendi e al. (2021), De izal e al. (2021), nguyen and Pham (2018), and ng
e al. (2017). also, discussion abou s ock ma ke libe alisa ion o echnological inno a ion (ala i e al., 2016)
and he mac oeconomic e ec a iables on he s ock ma ke (hsing, 2011) ha e been ca ied ou . P e iously,
s udies analysed he ela ionship be ween he s ock ma ke index and economic luc ua ions. howe e , his
s udy aims o examine he ela ionship be ween indonesia’s sec o al s ock indexes and economic luc ua ions
du ing shocks. he s udy will ocus on he esponse ime and composi ion o shocks be ween he a iables.
speci ically, his esea ch will analyse h ee sec o al s ock indexes - Basic indus y & chemicals (Bic),
Miscellaneous indus y (Msi), and consume goods indus y (cgi), which ha e no been s udied be o e.
he expec ed con ibu ion o his esea ch is o de e mine he esilience o hese h ee indus y sec-
o s du ing a shock. his in o ma ion will help hese indus ies con inue o mee he needs o he
indonesian people, e en du ing equen economic luc ua ions, c ises, and pandemics such as cOViD-19.
his esea ch will also help in es o s unde s and he esilience o he sec o al s ock ma ke and make
mo e p o i able in es men s.
o suppo he esea ch indings, he s udy will analyse he causali y be ween he s udied a iables,
ocusing on he apid esponse o shocks in in la ion and he exchange a e. he causali y es will help
es ablish a causal ela ionship be ween he a iables. he con en s ages o his s udy will begin by dis-
cussing he u gency o his esea ch, ollowed by a li e a u e e iew and analy ical me hods, he esul s
o he s udy, and a conc e e analysis. Finally, he s udy will conclude wi h a summa y o he key indings.
2. Li e a u e e iew
ins i u ional in es men ac i i ies equen ly impac inancial ma ke s and ac ual economic ac i i y (Bond
e al., 2012; naik e al., 2021; no singe , 2005; Wool idge & snow, 1990). Deb ins umen s, comme cial
secu i ies, sha es, bonds, p oo o deb , ciUs, sFcs, and o he de i a i es o secu i ies a e all conside ed
o be secu i ies. he s ock ma ke , howe e , s ill cons i u es a po ion o he capi al ma ke . i is possible
o ade sha es o publicly aded companies on a s ock ma ke . By o e ing sha es o he public in an
ini ial public o e ing, businesses can aise capi al on he p ima y ma ke (iPO). he p ima y ma ke is he
sec ion o he capi al ma ke whe e issue s di ec ly issue and o e equi y-backed secu i ies o sale o
in es o s. secu i ies ha ha e ne e been aded a e bough by in es o s. Only s ock ansac ions and
de i a i es a e conduc ed on he s ock exchange. an e icien ma ke is one in which in o ma ion sp eads
quickly and is e lec ed in s ock p ices, also known as ma ke a ionali y (Yalçın, 2010).
he indonesia s ock exchange cu en ly has 35 s ock indices. he s ock index is a s a is ic ha is e alu-
a ed on a egula basis and ep esen s he o e all p ice mo emen o a selec ion o s ocks made using
pa icula c i e ia and me hodology. he goals and bene i s o he s ock index include measu ing ma ke
sen imen , c ea ing passi e in es men p oduc s like index Funds and index e Fs as well as de i a i e p od-
uc s, ac ing as benchma ks o ac i e po olios, se ing as p oxies o asse classes in asse alloca ion,
measu ing and modelling e u ns on in es men ( e u n), sys ema ic isk, and isk-adjus ed-pe o mance.
Mac oeconomic ac o s and s ock ma ke ac o s a e closely ela ed o each o he . how much in lu-
ence does he mac oeconomy ha e on he s ock ma ke ? in 2017, Milani conduc ed a s udy using a
new-keynesian gene al equilib ium model o analyse he quan i a i e e ec s o in e ac ions be ween he
s ock ma ke , mac oeconomic ac o s, and mone a y policy. he model includes a weal h e ec esul ing
om changes in asse p ices ha a ec consump ion. he esea ch e u es he a ional expec a ions
hypo hesis and sugges s ha economic agen s de elop nea ly a ional expec a ions o e ime based on
hei obse ed economic model.
ai audo (2013) analysed a new-keynesian Dsge model ha included limi ed asse ma ke pa icipa ion
(laMP) o de e mine i mone a y policy should espond o s ock p ices, in e ms o he de e minacy and
lea nabili y o he Ra ional expec a ions equilib ium (e-s abili y) (Ree). hey ound ha when he deg ee o
cOgen BUsiness & ManageMen 5
laMP is high enough o c ea e an in e ed agg ega e demand channel o he ansmission o mone a y
policy, in e es a e egula ion ha allows a posi i e eac ion o s ock p ices acili a es bo h he de e minacy
and he e-s abili y o he basic Ree. his implies ha policy ules based on s ock p ices pe o m be e han
adi ional ules based on ou pu in e ms o equilib ium de e minacy and o e all wel a e.
Bjø nland and lei emo (2009) used s uc u al ec o au o eg essi e (VaR) me hods o measu e he
dependence on Us mone a y policy. hey esol ed he simul anei y p oblem o de ec ing economic and
s ock p ice shocks by using a combina ion o sho - un and long- un limi s while main aining he qual-
i a i e ai s o a mone a y policy shock as desc ibed in he li e a u e. hey ound a signi ican co ela ion
be ween in e es a e policy and absolu e s ock alues due o a change in mone a y policy ha accu-
a ely p edic ed he ede al unds a e by 100 basis poin s. he in e es a e ises by almos ou basis
poin s o e e y pe cen age poin ha ac ual s ock p ices ise.
lawal e al. (2018) conduc ed a s udy o analyse he impac o in e ac ions be ween mone a y and
iscal policies on he beha iou o he nige ian s ock ma ke . he s udy also looked a he e ec o policy
in e ac ion ola ili y on he s ock ma ke . he indings e ealed ha he in e ac ion o mone a y and
iscal policy has a signi ican impac on nige ia’s s ock ma ke e u ns, using he aRDl and egaRch
models. he s udy iden i ied i e po en ial ways ha mone a y policy could in luence s ock ma ke
e u ns, which a e he in e es a e hypo hesis, he c edi hypo hesis, he weal h e ec hypo hesis, he
exchange a e hypo hesis, and he mone a y hypo hesis.
hsing (2011) ca ied ou esea ch o explo e he impac o a ious economic ac o s on he sou h
a ican s ock ma ke index. he s udy ound ha he money supply o g oss domes ic p oduc a io,
he eal gDP g ow h a e, and he Us s ock ma ke index ha e a posi i e e ec on he s ock ma ke
index. howe e , he go e nmen de ici o gDP a io, domes ic eal in e es a es, and he e ec i e
exchange a e a e conside ed nega i e ac o s in he exponen ial gaRch Model. he e o e, he go -
e nmen is equi ed o main ain economic expansion, iscal esponsibili y, a high money supply a io
o gDP, low accu a e in e es a es, and low in la ion a es o keep he s ock ma ke s able. Rahmayani
and Ok a ilia (2021) s a ed ha he long- e m lull in indonesia’s s ock ma ke is due o he highe
cumula i e o al cOViD-19 cases. ahmad e al. (2021) ound ha s ocks in consume s aples, heal h-
ca e, elecommunica ions, u ili ies, and inancials a ac ed he mos a en ion du ing he cOViD-19
pandemic, and di e en indus ies in he sample coun ies eac ed o he ou b eak di e en ly.
Reg ession analysis was used by Vi hesson hi and echa ong ojwong (2012) o look a how mone a y
policy impac s s ock p ices. he expec ed shi in he buyback a e has a nega i e e ec on s ock e u ns
a he ma ke le el. con a ily, he indings e eal ha he unan icipa ed change in he epu chase a e
has no impac on s ock e u ns. howe e , i is possible o obse e a he i m le el how he unexpec ed
shi in he epu chase a e has impac ed s ock e u ns. he esea che s also disco e ed ha he e was
an asymme y in he s ock ma ke ’s eac ion o a change in he epu chase a e. e en hough i is con-
side ed good news, an unexpec ed change in he buyback a e has a nega i e e ec on s ock e u ns.
oge he , he e idence suppo s he no ion ha mone a y policy announcemen s ha e a signi ican
impac on s ock p ices and ad ances he ques ion o whe he he c edibili y o he mone a y au ho i y
in luences he s ock ma ke ’s eac ion o mone a y policy ac ions.
his s udy ocuses on analysing he s ock ma ke esponse o economic luc ua ions caused by in la-
ion and changes in exchange a es, speci ically o he consump ion indus y, basic indus y, and mis-
cellaneous indus y du ing he pandemic. he s udy will es and analyse causali y o explain he
ela ionship be ween sec o al s ock ma ke condi ions and mone a y policy o con ol in la ion and
exchange a es. he indings o his esea ch can con ibu e o he en ichmen o knowledge in he ield
o in es men when shocks occu . he consump ion indus y, basic indus y, and miscellaneous indus y
a e essen ial o mee ing he basic needs o he communi y, such as ood and clo hing. his shows he
s eng h and esilience o he sec o al s ock ma ke as an al e na i e o go e nmen policies o main ain
he economy in imes o global shocks.
3. Ma e ials and me hods
he esea ch me hodology used in his s udy is quan i a i e in na u e. he s udy is based on mon hly
da a om Janua y 2008 o Decembe 2020 (158 da a poin s) and ocuses on sec o al s ock a iables,
6 s. sURiani e al.
speci ically he s ock indices o he Basic, indus y & chemicals, consume goods, and Miscellaneous
indus ies sec o s. hese a iables a e used o measu e he eal sec o economy using index uni s. he
s udy ocuses on he h ee s ock sec o s men ioned abo e as hey a e c ucial in analysing ac i i ies
ela ed o public consump ion needs. consump ion plays a signi ican ole in de e mining he demand
o goods and se ices in socie y (su iani e al., 2021). exchange a e and in la ion a iables a e also used
in he s udy o measu e he change in he alue o Rupiah cu ency ela i e o he dolla and he a e
o p ice luc ua ion, espec i ely.
he quan i a i e esea ch me hodology used in his s udy employs ec o au o eg ession (VaR) mod-
elling. he VaR Model is ad an ageous as i is a simple model ha does no equi e dis inguishing
be ween endogenous and exogenous a iables. es ima ion is s aigh o wa d and can be applied o each
equa ion indi idually using he Ols me hod. in mos cases, he o ecas esul s ob ained h ough his
me hod ou pe o m hose ob ained h ough e en he mos complex simul aneous equa ion models. he
s udy aims o explo e he in e ela ionship ( ecip oci y) be ween economic a iables and he o ma ion
o a s uc u ed economic model. hol z-eakin e al. (1988) o med he speci ic bi a ia e au o eg ession
equa ion model (VaR) can be w i en as ollows:
y yx
i
m
i
i
m
i
=++ +
∑∑
=
−
=
−
α α αδ ε
0
1
1
1
1
,
(1)
i equa ion (1) is ans o med, he equa ion model o his s udy ss a e de o ed o h ee indus ial
sec o s, namely Bic (Basic indus y & chemicals), Msi (Miscellaneous indus y), and cgi (consume goods
indus y). he o mula can be w i en as ollows:
SS SS INF ER
i i i
=+∑ +∑ +∑ +
− −−
αγ γ γ ε
11 2 3
,
(2)
howe e , i he uni oo es esul s show s a iona y da a a he i s di e ence and coin eg a ed, hen
he model chosen is he VecM model o called limi ed VaR. change is indica ed by Δ ( he i s di e ence
ec o ). he esul s o he uni oo es indica e ha i is s a iona y a he i s di e ence and has no
coin eg a ed, so he bes model is VaR a his poin (see es esul s in ables 1 and 3). so he bes
model in his esea ch is VaR a i(1) model and can be w i en in he new equa ion o med as ollows:
∆ ∆ ∆ ∆ ∆∆
BIC BIC MSI CGI INF E
i i i i
= +∑ +∑ +∑ +∑ +∑
− − −−
αγ γ γ γ γ
11 2 3 4 5 RR
i
−
+
ε
,
(3)
∆ ∆ ∆ ∆ ∆∆
MSI MSI BIC CGI INF ER
i i i i
= + ∑ + ∑ + ∑ + ∑ +∑
−− −−
αγ γ γ γ
11 2 3 4 −−
+
i
ε
,
(4)
∆ ∆ ∆ ∆ ∆∆
CGI CGI BIC MSI INF E
i i i i
= +∑ +∑ +∑ +∑ +∑
− − −−
αγ γ γ γ γ
11 2 3 4 5 RR
i
−
+
ε
,
(5)
∆ ∆∆∆ ∆∆
INF INF BCI MSI CGI E
i i i i
=+∑ +∑ +∑ +∑ +∑
−− −−
αγ γ γ γ γ
11 2 3 4 5 RR
i
−
+
ε
,
(6)
∆ ∆∆ ∆ ∆ ∆
ER ER BCI MSI MSI INF
i i i i
=+∑ +∑ +∑ +∑ +∑
−− − −
αγ γ γ γ γ
11 2 3 4 5 i −
+
ε
,
(7)
Table 1. he uni oo es s. Resul s.
Va iables aDF i(0) aDF i(1) PP i(0) PP i (1)
BiC −0.9132 −11.5121 −0.9132 −15.5106
(0.7820) 0.0000)*** (0.3626) (0.0000)***
Cgi −1.7733 −11.5121 −1.7718 −11.4822
(0.3926) (0.0000)*** (0.3933) (0.0000)***
Msi −1.8676 −10.9795 −1.8631 −10.8928
(0.3469) (0.0000)*** (0.3490) (0.0000)***
inF −2.4150 −7.7846 −2.0957 −8.0441
(0.1393) (0.0000)*** (0.2468) (0.0000)***
eR −1.0476 −12.2690 −0.9892 −12.2979
(0.7353) (0.0000)*** (0.7564) (0.0000)***
no e: (.) is signi ican alue and *** is le el o signi icance (1%).
cOgen BUsiness & ManageMen 7
Fo equa ion (2), he a iable ss is he dependen a iable (sec o al sha es). his esea ch ocuses on
h ee equa ion models o dependen a iables (Bic, Msi, cgi) o his sec o al s ock. in addi ion, he
e o e m is
ε
, and he a iables is pe iod, and
α
a e cons an s. he le e s eR, iR, and inF s and o
he exchange a e, in e es a e, and in la ion, espec i ely. he ime-se ies analysis es s ages o he
VaR modelling will in ol e he da a s a iona i y es , model s abili y es , bes lag leng h es , coin eg a-
ion es , and causali y es . he upcoming es s a e he Fo ecas e o Va iance Decomposi ion Func ion
and he impulse Response Func ion. he Uni -Roo s es o da a s a iona i y employs he enhanced
Dickey-Fulle and Phillips Pe on echniques:
YY
= + −≤ ≤
−
ρε
1
11
ρ
,
(8)
he ε a iable in equa ion (6) ep esen s he s ochas ic e o e m in he classical assump ion, wi h he
di e ence ( a ian ) se o ze o and y being he ime-se ies. addi ionally, i he alue o a he i s di e -
ence le el is equal o 1, he da a is conside ed non-s a iona y. Once he da a is s a iona y, he s a iona y
es is comple ed in he second di e ence es , which also se es as he con inua ion o he uni oo es .
hen he model s abili y es is equi ed in using ime-se ies da a. his es p o es ha he model is good,
ob aining unbiased esul s. a e es ing he model s abili y condi ion (once he da a is p o en o be s a ion-
a y), he da a is es ed again in he VaR sys em. We can see he s abili y es esul s in 2 ( wo) o ms, namely
in a modulus alue able and a g aph o he in e se oo s o aR cha ac e is ic polynomial. he cha ac e is ics
conside ed in he modulus alue ha e a modulus alue below 1. he model es is said o be s able, and i
he modulus alue is below 1, and i he modulus alue is abo e 1, he model is o be uns able.
he cha ac e is ics o he in e se oo s o he aR cha ac e is ic polynomial g aph conce ning he poly-
nomial elemen s a e shown om he ci cle’s posi ion. i he poin s a e s ill in he ci cle, hen he model is
said o be s able. Wi h he achie emen o hese cha ac e is ics, he model in he VaR sys em is ca ego-
ised as s able so ha he nex es s age can be ca ied ou , namely he de e mina ion o he op imal lag.
since he lags o hese a iables a e used as independen a iables in he VaR Model, i is necessa y o
de e mine he ideal lag leng h. he op imal leng h o ime is known as he op imal lag leng h, and i is used
in ime-se ies analysis o quan i y how long a a iable’s in luence las s on o he a iables. in o de o keep he
es ima ion sys em ee o au oco ela ion issues, he lag leng h Op imal es is also equi ed. since he op i-
mum lag is employed in his simula ion, i is assumed ha he au oco ela ion p oblem won’ come up. in his
s udy, he schwa z in o ma ion c i e ion, he sequen ially modi ied lR es s a is ic, he Final p edic ion e o ,
he akaike in o ma ion c i e ion, he hannan-Quinn in o ma ion c i e ion, and he akaike in o ma ion c i e ion
a e jus a ew o he exis ing c i e ia ha a e aken in o accoun when de e mining he Op imal lag leng h.
in he case o wo o mo e non-s a iona y ime-se ies a iables, coin eg a ion is easible. he long- e m
s abili y o he ela ionship depends on whe he he ime-se ies a iables a e coin eg a ed (Moosa & Vaz,
2016). he coin eg a ion es de eloped by Johansen was employed in his s udy. a a con idence le el
o α = 5%, he ace s a is ical analysis used by he Johansen es esul s in a signi icance g ea e han
he c i ical alue. he p obabili y alue, which is less han 5%, deno es coin eg a ion.
Table 3. he esul s o Johansen coin eg a ion.
null hypo heses
-s a is ic C i ical alue
ace Max-eigen ace Max-eigen
= 0 54.3676 23.8731 60.0614 30.4396
≤ 1 30.4945 14.9149 40.1749 24.1592
≤ 2 15.5796 10.2033 24.2760 17.7973
≤ 3 5.3762 5.3762 12.3209 11.2248
≤ 4 2.69e-05 2.69e-05 4.1299 4.1299
Table 2. he esul s o modulus alue.
Roo Modulus
0.416079 0.416079
−0.261508 0.261508
−0.164015 0.164015
0.115371 0.115371
0.000901 0.000901
no e: no oo lies ou side he uni ci cle.
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cOgen BUsiness & ManageMen 15
Appendix A
