Detecting The Expected Rate of Return Volatility of Financing Instruments of Indonesian Islamic Banking through GARCH Modeling (Generalized Autoregressive Conditional Heteroscedasticity)

Authors

  • Nurul Huda YARSI University, Jakarta, Indonesia
  • Amrin Barata Badan Pusat Statistik RI (Statistics Indonesia)

DOI:

https://doi.org/10.30993/tifbr.v9i1.78

Keywords:

Islamic Financing Instruments, Expected rate of return, GARCH

Abstract

Objective - Islamic banks are banks which its activities, both fund raising and funds distribution are on the basis of Islamic principles, namely buying and selling and profit sharing. Islamic banking is aimed at supporting the implementation of national development in order to improve justice, togetherness, and equitable distribution of welfare. In pursuit of supporting the implementation of national development, Islamic banking often faced stability problems of financing instruments being operated. In this case, it is measured by the gap between the actual rate of return and the expected rate of return. The individual actual RoR of this instrument will generate an expected rate of return. This raises the gap or difference between the actual rate of return and the expected rate of return of individual instruments, which in this case is called the abnormal rate of return. The stability of abnormal rate of return of individual instruments is certainly influenced by the stability of the expected rate of return. Expected rate of return has a volatility or fluctuation levels for each financing instrument. It is also a key element or material basis for the establishment of a variance of individual instruments. Variance in this case indicates the level of uncertainty of the rate of return. Individual variance is the origin of the instrument base for variance in the portfolio finance that further a portfolio analysis. So, this paper is going to analyze the level of expected RoR volatility as an initial step to see and predict the stability of the fluctuations in the rate of return of Indonesian Islamic financing instruments.

Methods – Probability of Occurence, Expected Rate of Return (RoR) and GARCH (Generalized Autoregressive Conditional Heteroscedasticity).

Results - The expected RoR volatility of the murabaha and istishna financing instruments tend to be more volatile than expected RoR volatility of musharaka and qardh financing instruments.

Conclusions – The uncertainity of Musharaka and qardh financing instruments tend to be more stable than other Islamic financing instruments.

 

References

Alamsyah, Halim. (2012). Perkembangan dan Prospek Perbankan Syariah Indonesia: Tantangan Dalam Menyongsong MEA 2015. Paper Milad ke-8 Ikatan Ahli Ekonomi Islam (IAEI) di Ruang Auditorium Lt. 2 Gd. Badan Kebijakan Fiskal Kementerian Keuangan Republika Indonesia. Jakarta

Bank Indonesia. (2004-2015). Statistik Perbankan Syariah Indonesia. Jakarta: BI

Barata, Amrin. (2013). Penentuan Komposisi Optimal Kontrak Instrumen Pembiayaan Perbankan Syariah di Indonesia melalui Pembentukan Efficient Portfolio Frontier tahun 2004-2012 (Pendekatan Risk-Return dan Pemodelan GARCH. Jakarta : Sekolah Tinggi Ilmu Statistok (STIS).

Bilbiee, Florin. (2000). Applications of ARCH Modelling in Financial Time Series: the Case of Germany. Coventry, West Midlands CV4 7AL, United Kingdom : Department of Economics University of Warwick.

Cardinali, Alessandro. (2007). An Out-of-sample Analysis of Mean-Variance Portfolios with Orthogonal GARCH Factors. International Econometric Review (IER) Volume 4, Issue 1, pages 1-16.

Edi,et all. (2009). Quasi-Maximum Likelihood untuk Regresi Panel Spasial [Paper]. Surabaya: Institut Teknologi Sepuluh November (ITS).

Engle, Robert. (2001). The Use of ARCH/GARCH Models in Applied Econometrics. Jurnal of Economic Perspectives. Volume 15, Number 4, Pages 157-168.

Huda, Nurul, and Nasution, Mustafa. (2009). Current Issues Lembaga Keuangan Syariah. Jakarta: Kencana Prenada Media Group.

Ismal, Rifki. (2010). The Indonesian Islamic Banking (Theory and Practices). Bogor: Phd Gramata Publishing.

Joko, Kandung. (2007). Pengaruh Volatilitas Nilai Tukar Dan Nilai Neto Ekspor Terhadap Volatilitas Cadangan Devisa Indonesia Periode 1980-2006 [Skripsi]. Jakarta: Sekolah Tinggi Ilmu Statistik (STIS).

Markowitx H.M. (1991). Foundations of Portfolio Theory. Journal of Finance. Volume 46, Issue 2, pages 469–477.

Muhamad. (2001). Teknik Perhitungan Bagi Hasil di Bank Syariah. Yogyakarta: UII Press.

Nachrowi, dan Usman, Hardius. (2006). Ekonometrika untuk Analisis Ekonomi dan Keuangan. Jakarta: Lembaga Penerbit Fakultas Ekonomi Universitas Indonesia.

Obaidullah, Mohammed. (2005). Islamic Financial Services. Saudi Arabia: Islamic Economic Research Center, University Jeddah.

Ribeiro, Otavio, and Shigueru, Alberto. (2005). Brazilian Market Reaction to Equity Issue Announcements. Revista de Administração Contemporânea. Volume 9, No.spe2, Pages 36-46.

Lewis, Mervyn and Al-Qaoud, Latifa. (2001). Perbankan Syari’ah: Prinsip, Praktik, Prospek. Jakarta : Serambi.

Lee, Sang and Hansen, Bruce. (1994). Asymptotic Theory For The Garch (1,1) Quasi-Maximum Likelihoode Stimator. Econometric Theory, 10, 1994, 29-52.

Otoritas Jasa Keuangan. (2014). Statistik Perbankan Syariah Indonesia. Jakarta: OJK

Posedel, Petra. (2005). Properties and Estimation of GARCH(1,1) Model. Metodoloˇski zvezki, Vol. 2, No. 2, 2005, 243-257.

Savickas, Robert. (2003). Event-Induced Volatility And Test For Abnormal Performance. The Journal of Financial Research• Vol. XXVI, No. 2, Pages 165-178.

Supranto, Johanes. (2004). Statistik Pasar Modal Keuangan dan Perbankan. Jakarta: Rineka Cipta.

Syafi’i, Muhammad4. (2001). Bank Syari’ah dari Teori ke Praktik. Jakarta: Gema Insani Press.

Widarjono, Agus. (2009). Ekonometrika Pengantar dan Aplikasinya. Yogyakarta: Ekonisia.

Yahya, Arya. (2011). Pengaruh Perilaku Kurs(Rp/US$) Terhadap Ekspor Nonmigas Dan Produk Domestik Bruto Nonmigas Indonesia Periode 1993-2010 [Skripsi]. Jakarta: Sekolah Tinggi Ilmu Statistik.

Yulianti, Rahmani. (2009). Manajemen Risiko Perbankan Syariah. Jurnal Ekonomi Islam Vol. III, No. 2, P.151-165.

Downloads

Published

2015-04-30

Issue

Section

Articles