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Increasing portion of foreign ownership in Indonesia Capital Market bring about debates on either advantage or disadvantage on the economy. On one gand, foreign ownership would induce higher dependency of the economy to the external global. Shocks, subsequently increase domestic risks. On the other hand, foreign ownership results on more investment and liquidities for the country that would be giving long term benefits through capital acceleration. This study examines impact of foreign ownership and its risk to the capital market, as indicated by dynamics of capital market's volatility of Indonesia (BEI). Employing EGARCH (1,1) model, the study finds that Indonesian capital market is intesively integrated to the world market, especially regional market of Asia compared to the US. Moreover, by using OLS model to analyze factors affecting volatility of the market, the results show that along with increasing foreign trading frequencies would lead to positive impact on volatility. In other words, increasing foreign ownership would give less volatility in capital markets and therefore shows characteristics of stabilizing. Other variables are also indicated as factors affecting volatility of markets, namely interest rates, exchange rate, and previous man. |
