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money supply had a significant positive effect on the stock returns in the long-run.
The previous studies provide relevant information and motivate future research as enrichment of the empirical study to stock market field.
Therefore, the author distinguishes this study by offering these following particular differences:
1. Research case study This study will cover the case of Islamic Stock Market volatility
listed in Jakarta Islamic Index JII starting from year 2010 until 2014.
2. Variables This study use Dow Jones Islamic Market Index DJIM, FTSE
Bursa Malaysia Hijrah Shariah FHSI, exchange rate, customer price index, money supply, and BI rate which have various
contradictions in the previous studies. 3. Research Period
The data that will be used in this study consists of Jakarta Islamic Index JII since year 2010 until 2014.
2.3 Theoritical Framework and Hypothesis 2.3.1 The Influence of Dow Jones Islamic Market Index DJIM to
Jakarta Islamic Index
The macroeconomic variables that have great impact to capital market are not only from domestic but also the global macroeconomic
variable. One of the global macroeconomic variables is the Dow Jones Islamic Market Index. It is one of the major indexes in the United Stated
covering 30 of the largest multinational companies in the America. Dow
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Jones Islamic Market Index can describe the performance of the American economy. Thus, a strengthening this index reflects improved performance
of the U.S. economy. According to the research from Mohd Yahya Mohd Hussin 2013, Dow Jones Islamic Market Index had a significant bi-
directional causality to FTSE Bursa Malaysia Hijrah Shariah Index.
2.3.2 The Influence of FTSE Bursa Malaysia Hijrah Shariah Index FHSI to Jakarta Islamic Index
Domestic stock market not only influenced by global capital market but also from regional capital market. The regional capital market which
used as a standard of Islamic capital market is FTSE Bursa Malaysia Hijrah Shariah Index FHSI. FTSE Bursa Malaysia Hijrah Shariah Index
has been designed to be used as the basis of Shariah-compliant investment products that meet the screening requirements of international Islamic
investors. According to Mohd Yahya Mohd Hussin 2013, the FTSE Bursa Malaysia Hijrah Shariah Index had no co-integration relationship to
Indonesian Islamic stock market in long-term equilibrium. On the other hand, the results of the Granger causality test show a significant uni-
directional causality between FTSE Bursa Malaysia Hijrah Shariah Index and Jakarta Islamic Index. Therefore, the return of Jakarta Islamic Index is
significantly affected by the return of FTSE Bursa Malaysia Hijrah Shariah Index.
2.3.3 The Influence of Exchange Rate to Jakarta Islamic Index
The exchange rate was the changing proportion of currency between countries. Actually, changes in exchange rate affect exporter and importer
firms. Traditionally, if an appreciation depreciation of home currency, it will reduce enhance the international competition, and benefit affect
import trade export-trade or affect benefit import-trade export-trade
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for specific industry M. H. Cheng, 2011. In case of a depreciation of the domestic currency, it will lead the imported products become more
expensive in terms of the home currency. According to H. M Ibrahim2003 indicated that exchange rate was negatively associated with
stock prices. We predict that exchange rate is negatively affected on stock returns.
2.3.4 The Influence of Inflation to Jakarta Islamic Index
When the stock price is change, the link between inflation and stock return will appear. Besides that, the fluctuation in the inflation rate
represents proportion of risk associated with increase uncertainty in the return movement. Thus, consumer price index CPI is used to measure the
inflation rate. It measures average change in prices of goods and services in a particular period of time. Inflation becomes reason for government to
maintain value of money circulating in the market. It implies a mandatory policy to increase the discount rate that will reduce present value of cash
money circulating in the market. So that, an increasing in inflation rate will negatively influence equity price and increases the production cost. Most
study shows that inflation has negative impact to stock returns, as found by Syukma2011 on the relation between inflation and coal stock returns in
Jakarta Islamic Index and also Pramod Kumar Naik 2012 study between inflation and Indian stock prices.
2.3.5 The Influence of Money Supply to Jakarta Islamic Index
Money supply as one of the macroeconomic variables has positive or negative relationship. According to the research from Sohail Hussain
2009 and Vejzagic Zarafat 2013 indicated that money supply had positive significantly affected the stock returns. This positive relationship
is a basis for money supply to increase towards the increase of the
