36
EXCHANGE RATE = the change in exchange rate of Indonesian Rupiah to
US Dollar
C. Operational Variable
Operational variable is a statement of the specific dimensions and elements through which a concept will become measurable Sekaran, 2006.There
are two kinds of variable, which are independent variable and dependent variable, which we turn into certain dimension and definition.
The operational definition of each variable is as follow:
1. Stock’s Rate of Return
In calculating a stock‟s rate of return, the writer uses continuous compounding
method as follow:
[ ]
3.3
Where, r
t
= Continuously compounded returns on t period P
t
= Stock Price on t period P
t-1
= Stock Price on t-1 period From the formula above, we can see that a stock‟s rate of return can be
seen by the margi n of change in stock‟s price. The data of stock price used is the
closing price which gathered monthly during December 2005- December 2010.
37
2. Inflation Rate
The inflation rate data used in this research calculated from change in monthly inflation rate based on Consumer Price Index CPI. Inflation per month
can be calculated as follows:
� � �
�
3.4
After we calculate the monthly inflation rate, then to measure the change in inflation rate we can use this following formula:
���
3.5
Where, INFLATION
t
= Change in inflation rate during t period INF
t
= Inflation on t period INF
t-1
= Inflation on t-1 period
3. Exchange Rate
This research uses exchange rate of Indonesian Rupiah to US Dollar. The exchange rate uses is the mid-point between buy and write price.
38
���� �
� �
3.6
Where, EXRATE
t
= Change in exchange rate of Indonesian Rupiah to US Dollar in a t period
ER
t
= Exchange rate of Indonesian Rupiah to US Dollar in t period
ER
t-1
= Exchange rate of Indonesian Rupiah to US Dollar in t-1 period
This data is gained from the exchange rate of Indonesian Rupiah to US Dollar in monthly basis during December 2005-December 2010 published by Bank of
Indonesia.
4. Interest Rate
In this research, interest rate refers to Bank Indonesia Certificate SBI Rate on monthly basis. The operational definition used in this research is the
change in SBI rate. Change in Indonesia Interest Rate is defined as follows:
��� �
� �
3.7
Where, ∆IRATE
= Change in interest rate SBI rate on t period
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IR
t
= Interest rate SBI rate on t period IR
t-1
= Interest rate SBI rate on t-1 period
D. Data Analysis Technique Regression analysis will be used to test hypotheses formulated for this
study. Three variables inflation, interest rate, and exchange rate were entered.
Multiple regressions will determine the significant relationship between dependent and independent variables, the direction of the relationship, the degree
of the relationship and strength of the relationship Sekaran, 2006. Multiple regression are most sophisticated extension of correlation and are used to explore
the predict ability of a set of independent variables on dependent variable Pallant, 2001. Three hypotheses generated. From the hypothesis it gives direction to
assess the statistical relationship between the dependent and independent variables. The convention of P value has been set as of 5 i.e. 0.05 used as
evidence of a statistical association between the dependent and independent variables.
To gather the best model of research, researcher must perform other pre-tests. The test are: normality test, assumption test heteroscedasticity test, auto-correlation
test, multi-collinearity test, and hypothesis test.
1. Normality Test
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