Indonesia is one of the developing countries most preferable by international investors in 1990s. It is also one of the countries that hit by Asian Financial Crisis in 1998 the most. The crisis led to riots by the people demanding then-president whom has been in the office for thirty-two years to step down from the presidency sit. Indonesia Stock Exchange that has been cultivated to grow since 1970s was also halted due to poor economy and is facing loss in investors’ faith. Global Financial Crisis 2008 affects every countries economy worldwide, including Indonesia. Indonesia economy is significantly influenced by the global economy as the country production and investment are heavily depended on international market.
This study aims to investigate the effect of Twin Crises 1998 and Global Financial Crisis 2008 on Indonesia Stock Exchange. Daily indices data of Indonesia Stock Exchange during the specified phase of the events will be used to examine the stock return and volatility using Exponential General Auto Regression Conditional Heteroscedasticity (EGARCH) Mean model. The results show Twin Crises 1998 has no effect on the stock market return, though the market is more volatile during the crisis. The Global Financial Crisis 2008 affects the stock market return positively, while causing the market to be more volatile. The results will be useful consideration for investors in their investment decision-making process and government in responding crisis in the future.
