The Impact of Political Risk, Financial Risk and Economic Risk on Trading Volume of Islamic Stocks Exchange in Indonesia
Muhammad Ubaidillah Al Mustofa, Imron Mawardi, and Tika Widiastuti

Universitas Airlangga

Abstract

Risk is an important factor that would be considered in every investment decision. Higher risk tends to decrease the motivation of investors to put in their wealth in a stock market and vice versa. The purpose of this study is to examine the influence of political risk, financial risk and economic risk on investment decision to trade on Islamic stocks in Indonesia. Associative research methods using regression analysis and data processing on EViews will assist us to reach the goal. Islamic Sharia Stock Index, ISSI, listed in Indonesia Stock Exchange would be used to best represent the transaction of Islamic Stocks in Indonesia. Empirical results showed, partially political and economic risks negatively and significantly influenced on trade volume of ISSI. In other hand, the financial risk positively and insignificantly influenced on trade volume. While the composite risk, the compilation of three risks above, shows a significant and negative influence on the dependent variable. Few papers discussed how risks explicitly influenced the decision to invest in Islamic Stocks, especially in Indonesia. Suggestion for investors is to have the risks under control to minimize the potential loss.

Keywords: Investment Decision, Islamic Stock, ISSI, Risk.

Topic: Financial Management and Accounting