Linda Karlina Sari, Noer Azam Achsani, Bagus Sartono


Stock return volatility is a very interesting phenomenon because of its impact on global financial markets. For instance, an adverse shocks in one country’s market can be transmitted to other countries’ market through a particular mechanism of transmission, causing the related markets to experience financial instability as well (Liu et al., 1998). This paper aims to determine the best model to describe the volatility of stock returns, to identify asymmetric effect of such volatility, as well as to explore the transmission of stocks return volatilities in seven countries to Indonesia’s stock market over the period 1990-2016, on a daily basis. Modeling of stock return volatility uses symmetric and asymmetric GARCH, while analysis of stock return volatility transmission utilizes Vector Autoregressive system. This study found that the asymmetric model of GARCH, resulted from fitting the right model for all seven stock markets, provides a better estimation in portraying stock return volatility than symmetric model. Moreover, the model can reveal the presence of asymmetric effects on those seven stock markets. Other finding shows that Hong Kong and Singapore markets play dominant roles in influencing volatility return of Indonesia’s stock market. In addition, the degree of interdependence between Indonesia’s and foreign stock market increased substantially after the 2007 global financial crisis, as indicated by a drastic increase of the impact of stock return volatilities in the US and UK market on the volatility of Indonesia’s stock return.


GARCH asymmetric, modelling, stock market, volatility return, volatility transmission.

Full Text:



[IDX] The Indonesia Stock Exchange. (2016). Indonesia Stock Exchange Announces 2017 Targets.

Indonesia Investments. Retrieved October 23, 2016, from http://www.indonesia-investments.



[OECD] Organisation for Economic Co-operation and Development. (2015). Survei Ekonomi

OECD Indonesia. Retrieved October 23, 2016, from


Achsani, N. A., & Strohe, H. (2005). Asymmetric Stock Market Interdependencies: US Dominance

and Spillover Effects into Asia and Europe. In: Welfens PJJ. Integration in Asia and Europe:

Historical Dynamics, Political Issues, and Economic Perspective; with 30 Tables; 2005.

Springer, 145–164.

Ajireswara, A. (2014). Transmisi Volatilitas Saham Utama Dunia terhadap IHSG dan Indeks

Sektoral. Institut Pertanian Bogor.

Awartani, B. M. ., & Corradi, V. (2005). Predicting the Volatility of the S&P-500 Stock Index Via

GARCH Models: The Role of Asymmetries. International Journal of Forecasting, 21, 167–183.

Black, F. (1976). Studies in Stock Price Volatility Changes: Proceedings of the 1976 Business

Meeting of Business and Economic Section. American Statistical Association, 177–181.

Bollerslev, T. (1986). Generalized Autoregressive Conditional Heteroskedasticity. Journal of

Econometrics, 31(3), 307–327.

Booth, G. ., Martikainen, T., & Tse, Y. (1997). Price and Volatility Spillovers in Scandinavian

Stock Markets. Journal Banking & Finance, 21, 811–823.

Chuang, I. ., Lu, J. ., & Tswei, K. (2007). Interdependence of International Equity Variances:

Evidence from East Asian Markets. Emerging Market Reviews, 8(4), 311–327.

Dimpfl, T., & Jung, R. (2011). Financial Market Spillovers Around the Globe. Working Papers

on Global Financial Market, 20, 1–28.

Ding, Z., Granger, C., & Angle, R. F. (1993). A Long Memory Property of Stocks Market Returns

and A New Model. Journal of Empirical Finance, 1(1), 83–106.

Dornbusch, R., Fischer, S., & Startz, R. (2011). Macroeconomics, 11th Edition. New York:


Engle, R. . (1982). Autoregressive Conditional Heteroscedasticity with Estimates of The Variance

of UK Inflation. Econometrica, 50, 987–1000.

Engle, R. ., & Lee, G. J. (1993). A Permanent and Transitory Component Model of Stock Return

Volatility. Discussion Paper. San Diego.

Engle, R. F., & Bollerslev, T. (1986). Modelling The Persistence of Conditional Variances.

Econometric Review, 5(1), 1–50.

Engle, R. F., & Ng, V. K. (1993). Measuring and Testing The Impact of News on Volatility. The

Journal of Finance, 48(5), 1749–1778.

Glosten, L. R., Jagannathan, R., & Runkle, D. E. (1993). On The Relation Between Expected

Value and The Volatility of The Nominal Excess Return on Stocks. Journal of Finance, 48(5),


Gokbulut, R. I., & Pekkaya, M. (2014). Estimating and Forecasting Volatility of Financial Markets

Using Asymmetris GARCH Models: An Application on Turkish Financial Markets. International

Journal of Economics and Finance, 6(4), 23–35.

Gujarati, D. N. (2003). Basic Econometrics Fourth Edition. United States: McGraw-Hill.

In, F., Kim, S., Yoon, J. H., & Viney, C. (2001). Dynamic Interdependence and Volatility

Transmission of Asian Stock Markets Evidence from The Asian Crisis. International Review

of Financial Analysis, 10(1), 87–96.

Juanda, B., & Junaidi. (2012). Ekonometrika Deret Waktu. Bogor: IPB Press.

Kartika, T. R., Achsani, N. A., Manurung, A. H., & Nuryartono, N. (2012). Transmission of Stock

Return Volatility in Indonesia (IHSG) Towards USA (DJIA), Hongkong (HSII), and Singapore

(STI). Jurnal Keuangan Dan Perbankan, 14(1), 16–29.

King, M. A., & Wadhwani, S. (1990). Transmission of Volatility Between Stock Markets. The

Review of Financial Studies, 3(1), 5–33.

Lau, J. C., & Ivaschenko, I. (2003). Asian Flu or Wall Street Virus? Tech and Nontech Spillovers

in the United States and Asia. Journal of Multinational Financial Management, 13(4–5),


Lee, J. S. (2009). Volatility Spillover Effects Among Six Asian Countries. Applied Economic

Letters, 16(5), 501–508.

Lestano, & Sucito, J. (2010). Spillover Volatilitas Pasar Saham Indonesia dan Singapura Periode

-2005. Jurnal Akuntansi Dan Keuangan, 12(1), 17–25.

Liu, Y. A., Pan, M. S., & Shieh, J. C. P. (1998). International Transmission of Stock Price

Movements: Evidence from The US and Five Asian-Pacific Markets. Journal of Economics

and Finance, 22(1), 59–69.

Mishra, A. K., Swain, N., & Malhotra, D. K. (2007). Measuring Stock Market Volatility in An

Emerging Economy. International Journal of Business, 12(3), 343–359.

Miyakoshi, T. (2003). Spillovers of Stock Return Volatility to Asian Equity Markets from Japan and

the US. Journal of International Financial Markets, Institutions, and Money, 13, 389–399.

Montgomery, D. C., Jennings, C. L., & Kulahci, M. (2007). Introduction to Time Series Analysis

and Forecasting. Toronto: Wiley.

Nelson, D. B. (1991). Conditional Heteroskedasticity in Asset Ret



  • There are currently no refbacks.

This Journal is Indexed by :

Creative Commons License

Bulletin Of Monetary Economics and Banking is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

BULLETIN OF MONETARY ECONOMICS AND BANKING | Printed ISSN: 1410 8046 | Online ISSN: 2460 9196 | Published by: Bank Indonesia Institute, Bank Indonesia | Jl. M.H Thamrin No. 2 Jakarta, Indonesia | Phone:+62-21 2981–7335, Fax.: +62-21 350-1912. e-Mail:;;