David Kaluge
Investors are faced with many investment choices and when the market falls, they adjust their portfolios so as to gain maximum profits from their investments. Investors then sell stocks of unfavorable sectors and buy stocks of more profitable sectors. In the global stock market, spillovers occur when there is an economic downturn or a financial crisis. Some studies have noted this spillover effect among intra stock markets among Asian countries. In this study, the VAR-ASYMX was applied on data taken from the Jakarta Stock Exchange (BEI) and the Wall Street Journal (WSJ) in the timeline between 4th of March, 2013 to 1st of July, 2016. This study aims to understand how certain sectors transmit the shock or volatility experienced onto other sectors in the market. Results show that spillover effects, in terms of changes in mean of prices as well as volatility of prices, occurred in many business sectors. However, the spillover impact coverage of one sector is different from that of another sector. For instance, some sectors experienced shock after one day of the crisis while other sectors took two days or longer. The spillover affect certain domestic sectors which then affect other sectors while certain sectors were not affected by the spillover because they had no linkages at all. The same result applies to the mean and volatility of prices spillover. In the latter, risks were transferred from foreign markets as well as domestic markets onto other domestic sectors in the Indonesian data. In looking at the asymmetric responses of domestic sectors towards the shock transferred by foreign markets, it was found that many sectors reacted more severely when prices drop than when prices escalate. In this regard, policy makers should pay more attention to price drops in the stock markets of Malaysia (KLSE), South Korea KOSPI (KS11), and China-Hongkong Hangseng (HIS) so as to prevent a severe outcome of the crisis.
Faculty of Economics and Business, Brawijaya University, Indonesia
