HOW DO STOCK PRICES RESPOND TO FUNDAMENTAL SHOCKS? STUDY CASE OF INDONESIA

RAHMA DILA, RAHMA DILA (2015) HOW DO STOCK PRICES RESPOND TO FUNDAMENTAL SHOCKS? STUDY CASE OF INDONESIA. Diploma thesis, Universitas Andalas.

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Abstract

Composite price index is one of the important indicators for economic development in Indonesia. The development of the stock price index cannot be separate from the influence of economic fundamentals and support from policy maker. There are a wide variety of factors that can affect the change of composite price index. Increase or decrease the movements of the stock will be determined whether growth of economic is better off or worse off. Stock price becomes one of leading indicators significantly to the economic crisis in Asian countries in 1997-1998. When there is crisis, it will give impact to stock price (Broome and Moorley, 2004). Meanwhile industrial production as measures the total output in the business integrated in industrial sector of the economy such as manufacturing, mining, utilities that indicate the real sector macroeconomic of Indonesia. During the recession industrial production will decrease, because industrial production will give a signal to the economic growth. Industrial production is a proxy of gross domestic product. It measure real economic activity. It fluctuated all over year where it tends to show negative growth when to crisis hit Indonesia (tradingeconomic.com).

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