The Analysis of Flight-to-Safety Phenomenon from Stocks to Government Bonds and Their Effects on The Risk-Return Trade-off in Indonesia Stock Exchange Period March 2008 - May 2020

DOI

10.2991/aebmr.k.201222.021How to use a DOI?

Keywords

Flight-to-safety, Risk-return trade-off, Stock market, Investment

Abstract

This paper aims to analyze the relationship of the risk-return trade-off between excess return and excess return volatility on the stock exchange in Indonesia (in which both of them are already being conditioned by the macroeconomics factors) and see the effect of flight-to-safety on the relationship above. The Indonesian composite stock price index (IHSG) is used as the proxy for the risky asset while government bond (10-year Indonesian Government Bond) is used as the proxy for the safer asset. This research found a negative relationship on the risk-return trade-off in the IHSG, which indicates that the greater the volatility of the stock index’s excess return, the smaller the excess return will be obtained. In addition, a negative relationship was also found between the flight-to-safety index (using 10-Year Indonesian Government Bond) to the excess return of the IHSG. This implies that if an indication of flight-to-safety is found from the IHSG to the other assets, the smaller excess return of IHSG will be obtained as well. In the end, the results of this study indicate that an indication of the flight-to-safety phenomenon also strengthens the negative relationship between the risk-return trade-off found earlier.

Copyright

© 2020, the Authors. Published by Atlantis Press.

Open Access

This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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TY  - CONF
AU  - Kania Diah Rachmawati
AU  - Eko Rizkianto
PY  - 2020
DA  - 2020/12/23
TI  - The Analysis of Flight-to-Safety Phenomenon from Stocks to Government Bonds and Their Effects on The Risk-Return Trade-off in Indonesia Stock Exchange Period March 2008 - May 2020
BT  - Proceedings of the International Conference on Business and Management Research (ICBMR 2020)
PB  - Atlantis Press
SP  - 144
EP  - 150
SN  - 2352-5428
UR  - https://doi.org/10.2991/aebmr.k.201222.021
DO  - 10.2991/aebmr.k.201222.021
ID  - Rachmawati2020
ER  -