ISJ Theoretical & Applied Science 08(112) 2022

Philadelphia, USA

Asrofillah, M. F., Efni, Y., & Savitri, E.

The Effect of Foreign Fund Flow and Transaction Activity on The Volatility and Performance of The Indonesian Capital Market.

Full Article: PDF

Scientific Object Identifier: http://s-o-i.org/1.1/TAS-08-112-18

DOI: https://dx.doi.org/10.15863/TAS.2022.08.112.18

Language: English

Citation: Asrofillah, M. F., Efni, Y., & Savitri, E. (2022). The Effect of Foreign Fund Flow and Transaction Activity on The Volatility and Performance of The Indonesian Capital Market. ISJ Theoretical & Applied Science, 08 (112), 219-229. Soi: http://s-o-i.org/1.1/TAS-08-112-18 Doi: https://dx.doi.org/10.15863/TAS.2022.08.112.18

Pages: 219-229

Published: 30.08.2022

Abstract: This study aims to analyze the direct and indirect effects of net foreign and transaction activities on the volatility and performance of the capital market. The study was conducted on the Indonesia Stock Exchange with the research sample of historical data for the 2009-2018 periods which was officially requested to the Indonesia Stock Exchange. Those data were analyzed using Path Analysis with the Partial Least Square (PLS) method. The results showed that foreign fund flow directly had a significant positive effect on capital market performance. Meanwhile, stock price volatility had a significant negative effect on capital market performance. Indirectly, volatility positively and significantly mediated the relationship between foreign fund flow and capital market performance. Furthermore, any significant results could not be found in the transaction activity variable, either a direct or indirect relationship with the performance of the capital variable. Volatile market conditions needed attention since they tended to harm investment returns. The magnitude of the dominance of foreign ownership of funds in the capital market tended to have an impact on the high dependence of capital market fluctuations and stock performance on foreign investor activities.However, the high level of foreign funds entering the market and the high level of volatility pushed stock returns to be more optimal for investors. The feasibility of the research model was indicated by the Q-Square value for stock price volatility of 0.117 and the capital market performance of 0.144 indicating that the predictive relevance of this research model was very good.

Key words: Foreign fund flow, Transaction Activity, Volatility, Capital Market Performance.