Indonesia Conference Directory

Indonesia Stock Exchange contains Islamic stocks for Muslim investors who want to invest. The first Islamic stocks index in Indonesia is Jakarta Islamic Index or JII. It consists of thirty of the most liquid Islamic stocks. The market capitalization of the JII tends to increase every year. This paper investigate the existence of herding behavior in emerging market specifically Islamic stock market of Indonesia using daily return of Indonesia Composite Index and JII from 10 October 2000 to 5 October 2018. Herding behavior in stock market can trigger shifting market prices from equilibrium values. Herding behavior can be identified from relation between dispersion of stock return and market return. Dispersion of stock return is measured using Cross Sectional Absolute Deviation or CSAD. Generalized Auto Regressive Conditional Heteroskedasticity or GARCH model is used to detect the existence of herding behavior. GARCH does not see heteroscedasticity as a problem, instead uses it to make a model. The result indicates that herding behavior exist in Islamic stock market of Indonesia. This result is similar to Chaffai and Medhiob who find evidence of herding behavior in the Islamic Gulf Cooperation Council stock markets.