The Influence of Oil Price Fluctuations on Indonesian Stock Prices Through Wavelet Coherence

Abstract

Oil is the most important source of energy in the world. In 2014 price of world oil (WTI / West Texas Intermediate) showed a decline. The decline in oil price was followed by stock prices including the price of Indonesian stocks. A phenomenon where asset price move together, known as comovement be an important indicator for investors to make investment decisions. This study aimed to know the influence of oil price fluctuations on Indonesian stock prices during the oil prices downturn from 2014 (March 2014-March 2017). Shares study consist of five Indonesian stocks; Adaro Energy Tbk (ADRO), Aneka Tambang Tbk (ANTM), Vale Indonesia Tbk (INCO), Perusahaan Gas Negara (Persero) Tbk and Tambang Batubara Bukit Asam (Persero) Tbk. The method used the method of wavelet coherence. Based on this method, the time series can be investigated in time domain and frequency domain. Plot of wavelet coherence gave information about comovement of two time series. The result of this study indicate that Adaro Energy Tbk has the most significant comovement while Perusahaan Gas Negara (Persero) Tbk shows the least. Perusahaan Gas Negara (Persero) Tbk showed a lower risk and more stable and are not affected by oil price fluctuations.