T. Nur Azizah’s research while affiliated with University of Brawijaya and other places

Stock market index is a tool used by the investors to determine the market and compare to return on some certain investments. Many studies have been conducted aimed at investigating the relationship between stock market index and macroeconomic fundamentals. However, only a few studies investigated the Sharia stock index. This study investigated the long-term and short-term relationship between Indonesian Sharia Stock Index (ISSI) as the dependent variable and macroeconomic fundamentals as the independent variables comprising Consumer Price Index (CPI)-the proxy for inflation rate, interest rate, exchange rate, and money supply. The method used to investigate the long-term and short-term relationship was Vector Error Correction Model (VECM). Before using VECM, Johansen’s Co-integration Test was used to test the co-integration relationship between the dependent and independent variables. The result of showed that there is a long-term relationship, but no short-term relationship between those variables was found. The result of both tests revealed significant relationship between dependent variable and independent variables. However, the variable of CPI was insignificant in influencing ISSI. The conclusion is that ISSI reacts positively towards interest rate and money supply while high depreciation of Rupiah will potentially create difficulty towards the market conditions in a long-term.