Is There Bull and Bear Markets in the Indonesia Stock Exchange?

Abstract

Emerging participants in the Indonesia Stock Exchange (ISE) are the group of local retail players, characterized by small, frequent, and short-term trading activities that rely on market phases. Hence it is important for brokerage houses as well as the local retail players to enter the market at the appropriate moments. The goal of this paper, therefore, is to use regime-switching model using the weekly ISE index data to identify periods where the market is in a volatile period. Results from the calculation shows that the market is divided into two regimes: stable and volatile. Average length of period for each regime is 16 weeks and 10 weeks.

Keywords

• Stock
• regime-switching
• maximum likelihood
• retail investors.