# Sustainability of Global Economic Policy and Stock Market Returns in Indonesia

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## Abstract

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## 1. Introduction

## 2. Literature Review

## 3. Data and Methodology

#### 3.1. Data

#### 3.2. Methodology

#### 3.2.1. Rolling Window Correlation

#### 3.2.2. Dynamic Conditional Correlation

#### 3.2.3. Autoregressive Distributed Lag Model

## 4. Empirical Analysis

#### 4.1. Descriptive Statistics

#### 4.2. Rolling Window Correlation

#### 4.3. Dynamic Conditional Correlation Results

#### 4.4. Autoregressive Distributed Lag Model

## 5. Conclusions

## Author Contributions

## Funding

## Institutional Review Board Statement

## Informed Consent Statement

## Data Availability Statement

## Acknowledgments

## Conflicts of Interest

## Ethical Approval

## References

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JKSE | GEPU | |
---|---|---|

Mean | 1.070 | 111.970 |

Std | 6.498 | 41.324 |

Skewness | −1.122 | 0.916 |

Kurtosis | 8.188 | 3.857 |

JB | 286.250 * | 36.783 * |

Unconditional correlation between JKSE and GEPU | −0.147 ** (−2.170) | |

ADF (Constant) | −11.689 * | −3.947 ** |

DF (Structural Break) | 13.536 * | 5.720 * |

ARCH (2) LM Test | 3.391 ** | 4.532 ** |

Mean | Std | Skewness | Kurtosis | JB | |
---|---|---|---|---|---|

Rolling Correlation | −0.1633 | 0.1997 | −0.0253 | 1.8647 | 9.9869 |

Variable | Mean | Std | Skewness | Kurtosis | JB |
---|---|---|---|---|---|

DCC | −0.168328 | 0.1154 | −0.567098 | 2.530553 | 12.30539 |

Parameter | Estimate | Standard Error | T-Ratio [Prob] |
---|---|---|---|

${\lambda}_{1}$ | 0.92448 | 0.025413 | 36.3783[0.00] |

${\lambda}_{2}$ | 0.98549 | 0.0095123 | 103.6013[0.00] |

Δ | 0.97543 | 0.025228 | 38.6644[0.00] |

Dof | 5.3871 | 1.3321 | 4.0440[0.00] |

Variable | Augmented Dickey−Fuller Test | Dickey–Fuller Test with Structural Break | ||
---|---|---|---|---|

Level | 1st Difference | Level | 1st Difference | |

$cp{i}_{t}$ | −0.1424 | −11.350 * | −5.787 * | −14.823 * |

$gco{p}_{t}$ | −2.279 | −10.611 * | −4.356 | −11.196 * |

$gd{p}_{t}$ | −2.797 | −3.019 | −4.013 | −21.352 * |

$wco{p}_{t}$ | −2.871 | −12.537 * | −3.969 | −14.169 * |

1% Critical values | −4.006 | −4.006 | −5.347 | −5.347 |

Model 1 | Model 2 | Model 3 | ||||
---|---|---|---|---|---|---|

Calculated F Statistic | 4.548 | 4.008 | 4.629 | |||

Significance Level | Pesaran et al. (2001) [87] | Pesaran et al. (2001) [87] | Pesaran et al. (2001) [87] | |||

LB | UB | LB | UB | LB | UB | |

1 percent | 3.29 | 4.37 | 3.29 | 4.37 | 3.29 | 4.37 |

5 percent | 2.56 | 3.49 | 2.56 | 3.49 | 2.56 | 3.49 |

10 percent | 2.2 | 3.09 | 2.2 | 3.09 | 2.2 | 3.09 |

Variable | Model 1 | Model 2 | Model 3 |
---|---|---|---|

Constant | 15.344 (2.281) ** | 17.528(2.558) ** | 17.479(2.572) ** |

$cp{i}_{t}$ | 1.862(4.094) ** | 2.075(3.821) ** | 2.051(3.794) ** |

$gco{p}_{t}$ | 0.30(6.293) ** | 0.311(6.341) ** | 0.306(6.329) ** |

$gd{p}_{t}$ | −0.892(−4.185) ** | −0.941(−4.126) ** | −0.935(−4.010) ** |

$wco{p}_{t}$ | 1.691(3.571) ** | 1.461(2.530) ** | 1.450(2.720) ** |

Variable | Model 1 | Model 2 | Model 3 |
---|---|---|---|

$\u2206dc{c}_{t-1}$ | 0.189(2.73) ** | 0.167(2.353) ** | 0.169(2.421) ** |

$\u2206cp{i}_{t}$ | −0.829(−2.489) ** | −0.761(2.297) ** | −0.779(−2.359) ** |

$\u2206cp{i}_{t-1}$ | 0.380(0.938) | 0.406(1.004) | 0.392(0.974) |

$\u2206cp{i}_{t-2}$ | −0.830(−2.360) ** | −0.801(−2.282) ** | −0.807(−2.303) ** |

$\u2206cp{i}_{t-3}$ | −0.259(−0.984) | −0.242(−0.920) | −0.248(−0.948) |

$\u2206cp{i}_{t-4}$ | −0.048(−0.186) | −0.026(−0.10) | −0.030(−0.117) |

$\u2206cp{i}_{t-5}$ | −0.666(−2.755) ** | −0.632(−2.617) ** | −0.638(−2.650) ** |

$\u2206cp{i}_{t-6}$ | 0.018(0.073) | 0.041(0.169) | 0.035(0.144) |

$\u2206cp{i}_{t-7}$ | −0.730(−3.118) ** | −0.685(−2.920) ** | −0.696(−2.971) ** |

$\u2206gd{p}_{t}$ | −0.442(−2.720) ** | −0.423(−2.611) ** | −0.432(−2.682) ** |

$\u2206gd{p}_{t-1}$ | 0.412(2.132) ** | 0.420(2.179) ** | 0.416(2.165) ** |

$\u2206gd{p}_{t-2}$ | −0.281(−1.685) | −0.272(−1.641) | −0.273(−1.647) |

$RI$ | −0.003(−2.166) ** | ||

$R{I}_{1}$ | 0.002(0.518) ** | ||

$R{I}_{2}$ | −0.008(−1.891) | −0.006(−2.055) ** | |

$RI3$ | −0.004(−2.459) ** | −0.004(−2.494) ** | |

$ec{t}_{t-1}$ | −0.115(−5.300) ** | −0.114(−4.977) ** | −0.115(−5.348) ** |

${R}^{2}$ | 0.22 | 0.23 | 0.23 |

DW | 2.03 | 2.02 | 2.04 |

F statistic LM test | 0.69[0.69] | 0.552[0.7] | 0.62[0.65] |

F statistic ARCH test | 3.331[0.012] | 3.15[0.02] | 3.098[0.02] |

F statistic Ramsey RESET test | 0.809[0.6] | 1.091[0.372] | 1.032[0.414] |

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**MDPI and ACS Style**

Hashmi, S.M.; Gilal, M.A.; Wong, W.-K.
Sustainability of Global Economic Policy and Stock Market Returns in Indonesia. *Sustainability* **2021**, *13*, 5422.
https://doi.org/10.3390/su13105422

**AMA Style**

Hashmi SM, Gilal MA, Wong W-K.
Sustainability of Global Economic Policy and Stock Market Returns in Indonesia. *Sustainability*. 2021; 13(10):5422.
https://doi.org/10.3390/su13105422

**Chicago/Turabian Style**

Hashmi, Shabir Mohsin, Muhammad Akram Gilal, and Wing-Keung Wong.
2021. "Sustainability of Global Economic Policy and Stock Market Returns in Indonesia" *Sustainability* 13, no. 10: 5422.
https://doi.org/10.3390/su13105422