DOES THE BOYCOTT MOVEMENT AFFECT THE VOLATILITY OF STOCK RETURNS? A COMPARATIVE STUDY OF IHSG AND ISSI

Rafli Ananta Zikri, Muhammad Nur Faaiz Fathah Achsani, Asep Nurhalim

Abstract


The heating of the Palestine–Israel conflict in October 2023 triggered boycott movements targeting companies that support Israel and generated concerns regarding the financial market stability. This study examines the impact of boycott movements and macroeconomic factors on stock return volatility in Indonesia. Using time-series data from January 2021 to April 2025, the analysis compares the conventional index represented by the IDX Composite (IHSG) and the Islamic index represented by the Indonesia Sharia Stock Index (ISSI). Volatility dynamics are modelled using the ARCH/GARCH, while short-run and long-run relationships are analyzed using the ARDL approach. The results show that the optimal volatility of Islamic stocks exhibiting faster adjustment toward long-run equilibrium. The boycott movement significantly increases long-run volatility in the IHSG, whereas its effect on ISSI volatility is insignificant, indicating greater resilience of Islamic stocks. Inflation and industrial production reduce volatility, while exchange rate depreciation amplifies volatility in both indices. These findings contribute to the market volatility and Islamic finance literature by demonstrating that ethical screening and Sharia-compliant investment structures mitigate the transmission of boycott-induced geopolitical risk. The results offer practical implications for investors and regulators in strengthening Islamic capital markets as a stabilizing mechanism during periods of socio-political uncertainty.

Keywords


Boycott Movement; Stocks; Volatility

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DOI: https://doi.org/10.18860/ed.v14i1.36535

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