ISSN: 2222-6990
Open access
Indonesia is one of the countries that are still arranging on country development, where investment activity is one of the attempts to increase the country's economic development. Mobilizing bank stock returns is an important prerequisite for economic and national development, and economics can be sustained if resources are mobilized efficiently and transformed effectively through investment activity. Therefore, this study aimed to determine whether the bank stock returns and macroeconomic variables such as composite index, exchange rate, short term interest rate, and long term interest rate are important factors for the country's development. This research also aims to determine the significant relationship between the Jakarta Composite Index (JCI), Forex rate of IDR to USD (FRX), Long term interest rate (LIR) and Short term interest rate (SIR) with the Indonesia Bank Stock Returns. Each bank's stock return is calculated using the company's closing price, while portfolio returns are calculated using the Indonesia Stock Exchange's Sector Financials Index (IDX). We used weekly time-series data from 2010 to 2019 and concentrated on the ten (10) largest Indonesian banks by total assets in the first quarter of 2020 (Q12020). The first findings using correlation analysis reveal that JCI and FRX are the most significant and adversely correlated with Indonesian bank equity returns, whereas SIR and LIR exhibit mixed correlations. All four factors correlate positively with portfolio returns, whereas the JCI and FRX have exceptionally strong significant correlations. The LIR has the poorest correlation and is therefore insignificant. The multiple regressions indicate that JCI is the primary factor influencing the equity returns of Indonesian banks. FRX, LIR, and SIR, on the other hand, are not important for the mixed effects. Each of the four factors affects portfolio returns, with the first three having a positive effect and the SIR having a negative effect. These findings will be a good indicator for policy and decision-makers to make their decision and serve as headline indications for market investors and fund managers, particularly those who invest in bank stocks. Future researchers need to consider more variables such as inflation, rate of return, and others. The inclusion of these variables would provide the researcher with a broader base of understanding. In order to improve the finding of this research, it is highly recommended for other researchers to get accurate data of the countries.
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In-Text Citation: (Isa et al., 2021)
To Cite this Article: Isa, M. A. M., Leha, N. J., & Mohamed, S. (2021). The Impact of Macroeconomic Variables on The Banks’ Stock and Portfolio Returns: Indonesian Evidence. International Journal of Academic Research in Business and Social Sciences, 11(11), 1118 – 1132.
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