JTUS, Volume 3 No. 1 January 2025 21

JTUS, Vol. 03, No. 1 January 2025

E-ISSN: 2984-7435, P-ISSN: 2984-7427

DOI: https://doi.org/10.58631/jtus.v3i1.144

Islamic Stock Market Efficiency: Volatility and Performance Analysis

Amid Global Economic Uncertainty

Choiruddin1*, Safrizal2, Dewi Sartika3, Addiya Ullami4,

Romadhan5, Arief Safari6, Amie Amelia7

Institut Teknologi dan Bisnis Ahmad Dahlan Jakarta, Indonesia

choiruddin354@gmail.com1, safrizalib01@gmail.com2, d3wiaisyah@gmail.com3,

saripanwar60@gmail.com4, ramaelzayn98@gmail.com5, safari2606@gmail.com6,

ameliaamie6[email protected]om7

Abstract

The efficiency of the Islamic stock market is pivotal amid global economic uncertainties, serving as

a resilient alternative to conventional markets through adherence to sharia principles. This study

aims to analyze the efficiency, volatility, and performance of the Indonesian Islamic stock market

(Jakarta Islamic Index/JII) over a five-year period (2019–2024), reflecting global economic challenges.

Using a quantitative approach, this research employs volatility and performance analysis models

with data drawn from financial reports and macroeconomic indicators. Findings reveal that while the

Islamic stock market in Indonesia experiences increased volatility during economic crises, it

demonstrates superior stability and competitive returns compared to conventional markets. These

results underscore the role of sharia principles in mitigating speculative risks and enhancing market

resilience. Implications of this study suggest that policymakers, investors, and regulators can

leverage the insights to develop strategies for risk management and investment optimization within

the Islamic capital market ecosystem. Enhanced financial literacy and technological innovations are

recommended to bolster transparency and efficiency, ensuring sustainability in the global economic

landscape.

Keywords: Islamic Stock Market, Market Efficiency, Volatility Analysis, Global Economic Uncertainty,

Jakarta Islamic Index, Sharia-Compliant Investments.

INTRODUCTION

In the perspective of Islamic capital markets, efficiency is an important indicator to measure the

extent to which available information is reflected in stock prices (Rodoni, 2019). However, previous

research shows that there are information imbalances that can cause inefficiencies in the Islamic market

compared to the conventional market that is currently developing (Siska, 2022). These inequalities are

often caused by a lack of understanding of the operational mechanisms of Islamic stocks, including

certain ethical restrictions and prohibitions that can affect market liquidity and volatility (Sunaryono et

al., 2024).

Amidst global economic uncertainties, such as rising global interest rates, geopolitical conflicts,

and global supply disruptions, the Islamic stock market faces additional challenges to maintain stability

Choiruddin, Safrizal, Dewi Sartika, Addiya Ullami, Romadhan, Arief Safari, Amie Amelia

22 JTUS, Volume 3 No. 1 January 2025

(Islam et al., 2024). However, the real sector-based nature of Islamic stocks can be a competitive

advantage in maintaining investment value in times of crisis (Pardiansyah, 2017).

The existence of Islamic stock indices, such as the Jakarta Islamic Index (JII) and the Indonesia

Islamic Stock Index (ISSI), demonstrates the ongoing efforts to strengthen the Islamic capital market

ecosystem in the global market. However, high volatility due to external changes raises questions

about the extent to which the Islamic stock market can be categorized as an efficient and productive

market (Syamsu Alam et al., 2021). In this context, research that analyzes the relationship between

volatility, efficiency, and performance of the Islamic stock market is needed to support the

development of future market policies.

Previous research relevant to this study provides important insights into the efficiency and

characteristics of the Islamic stock market. Study by (Malik, 2017) shows that the Islamic stock market

in Indonesia has weak efficiency with low liquidity, illustrating the condition of the domestic Islamic

stock market. Meanwhile, (Beik & Fatmawati, 2014) found that despite the higher volatility of Islamic

stocks compared to conventional stocks, the Islamic market shows stability in the long run, providing

an in-depth understanding of the relationship between volatility and market efficiency. Furthermore,

research (Nuraini, 2024) emphasized that financial technology plays an important role in improving

the transparency and efficiency of the Islamic stock market, showing the great potential of technology

in supporting the development of the Islamic market.

Most of the previous studies only focus on the market efficiency aspect without integrating

volatility analysis in depth. In addition, there is limited research on the impact of external factors, such

as the global economic crisis, on the efficiency of the Islamic stock market, which is needed in the

global market (Malik, 2017).

Based on the above background, the purpose of this study is to analyze the relationship between

volatility, efficiency, and performance of the Islamic stock market in Indonesia in the face of global

economic uncertainty. This research also seeks to uncover the impact of external factors, such as the

global economic crisis, on the stability and sustainability of the Islamic stock market. The benefit of

this research is to provide strategic insights for stakeholders, including investors, regulators, and

academics, to develop policies that support the efficiency and stability of the Islamic capital market.

For investors, the results of this study can serve as a guide for better investment decision-making amid

economic uncertainty. For regulators, the findings of this study can serve as a basis for formulating

policies that increase transparency and reduce risk in the Islamic capital market. Meanwhile, for

academics, this research can be a reference in developing further studies related to the efficiency and

dynamics of Islamic capital markets in a global context.

METHOD

This study employs a quantitative approach integrated with descriptive and inferential analysis

methods to evaluate the efficiency, volatility, and performance of the Islamic stock market amid global

economic volatility. The research focuses on the Islamic stock market in Indonesia, represented by the

Indonesian Islamic Stock Index (ISSI), as well as the global Islamic stock market represented by the

Dow Jones Islamic Market Index (DJIMI).

Efficiency of Islamic Stock Market: Volatility and Performance Analysis amid Global Economic

Uncertainty

JTUS, Volume 3 No. 1 January 2025 23

Research Criteria

The research population comprises all companies listed on the Islamic stock indices at both

national (ISSI) and international (DJIMI) levels. The sample is selected purposively, adhering to the

following criteria:

1. Companies that remained consistently listed on the respective sharia index throughout the research

period (2019–2024).

2. Companies with complete and publicly available financial reports for the research period.

3. Companies representing diverse sectors of the economy to ensure broad coverage.

The targeted sample size consists of 50 companies for national analysis (ISSI) and 30 companies

for international analysis (DJIMI), ensuring a representative assessment of Islamic stock market

dynamics.

Data Collection

This study utilizes two primary types of data:

1. Secondary Data: Includes daily stock price data obtained from the Indonesia Stock Exchange (IDX)

platform and the Dow Jones Islamic Market Index, alongside macroeconomic variables such as

inflation rates, interest rates, and exchange rates sourced from Bank Indonesia and the World Trade

Organization (WTO).

2. Qualitative Data: Derived from company annual reports, providing insights into compliance with

sharia principles and operational practices.

Data Analysis

Descriptive statistical techniques are applied to evaluate data distribution and historical trends

in market volatility, complemented by inferential analysis to test hypotheses and draw conclusions.

Data validity is ensured through the use of official and credible sources such as the Indonesia Stock

Exchange and the World Bank. To verify reliability, test-retest analysis is employed, confirming the

consistency and reproducibility of results across different datasets. This methodological framework

enables a comprehensive analysis of the Islamic stock market's efficiency and its response to external

economic shocks, ensuring robust and actionable insights for stakeholders.

RESULTS AND DISCUSSION

Efficiency of Islamic Stock Market in the Context of Global Economic Uncertainty

Islamic stock market efficiency can be measured through its ability to utilize information

optimally, with stock prices reflecting all available information. Based on research conducted by

(Nasution, 2015), the Islamic stock market shows semi-strong efficiency characteristics, where stock

prices reflect publicly available information, but there are still opportunities for market participants to

obtain higher profits in the short term.

In the face of global economic uncertainty, for example during the 2008 financial crisis or the

COVID-19 pandemic, Islamic stocks tend to be more stable than conventional stocks. Research by

(Febrianti, 2018) confirmed this, showing that Islamic stocks in Indonesia experienced a smaller price

decline during the crisis compared to the conventional stock index. This can be explained by Islamic

investment principles that emphasize long-term investment and rejection of excessive speculation, as

Choiruddin, Safrizal, Dewi Sartika, Addiya Ullami, Romadhan, Arief Safari, Amie Amelia

24 JTUS, Volume 3 No. 1 January 2025

well as instruments that are more transparent in the valuation of their assets in the global economic

market.

However, in situations of global uncertainty such as political tensions or trade wars, Islamic

stocks also experience significant pressure. This shows that although the Islamic stock market is

relatively more stable, it remains vulnerable to external factors that are global in nature and affect the

underlying sectors of the world economy and the global economy (Halim, 2020).

Volatility and Risk of Islamic Stock Market

Stock market volatility refers to the level of stock price fluctuations that occur within a certain

period. This volatility is very important because it can affect investment decisions, both by institutional

and individual investors. One important indicator used to measure volatility is the coefficient of

variation and the GARCH (Generalized Autoregressive Conditional Heteroskedasticity) model, which

can capture the dynamics of volatility in the Islamic stock market (Agustin, 2015).

Based on data obtained from the Indonesia Stock Exchange (IDX) and analysis conducted by

(Puspitasari et al., 2024), Islamic stocks tend to have lower volatility compared to conventional stocks,

especially in the face of global economic uncertainty. In the 2020 crisis, Indonesian Islamic stocks only

experienced a decline of around 10%, while the conventional stock market experienced a decline of

more than 20%. This lower volatility can be explained by the Islamic investment principles that reduce

speculative risk and prioritize stability.

However, it is also possible that in a more in-depth analysis, Islamic stocks also show quite sharp

fluctuations in some sectors, such as the energy and commodity sectors which are strongly influenced

by international price policies and currency exchange rates. (Mutohharo & Nurhayati, 2021).. Therefore,

although the Islamic stock market is more stable, external factors affecting the global economy still

have an effect on stock price fluctuations in the global market.

The Effect of Global Economic Uncertainty on Islamic Stocks

Global economic uncertainty has a major impact on the stock market, both conventional and

Islamic stocks. During the 2020-2023 analysis period, the Islamic stock market experienced a sharp

decline during the COVID-19 pandemic, but with a faster recovery than the conventional stock market.

Research by (Jauhari, 2024) shows that Islamic stocks show higher resilience amid global economic

uncertainty. This is because Islamic stocks are more influenced by sectors that have strong

fundamentals and are less exposed to price fluctuations caused by global market speculation.

Sectors that are less affected by the crisis such as the food and medicine sector are more

dominant in the Islamic stock market. In this case, Islamic stocks are more driven by stable and socially

responsible principles, in accordance with the concept of Islamic economics that prioritizes shared

prosperity in improving the global economy.

However, global economic uncertainty caused by factors such as global inflation and tight

monetary policy continued to affect the performance of Islamic stocks (Jalil et al., 2024). Some Islamic

companies that focus on sectors that are more vulnerable to crisis, such as the hospitality and

aviation sectors, experienced significantly sharper declines.

Efficiency of Islamic Stock Market: Volatility and Performance Analysis amid Global Economic

Uncertainty

JTUS, Volume 3 No. 1 January 2025 25

Comparison of Islamic and Conventional Stock Markets in Response to Economic

Uncertainty

One of the interesting findings of this analysis is that Islamic stocks are more reactive to

fundamental and long-term information, while conventional stocks are more influenced by short-

term speculation. This is consistent with the theory of market efficiency developed by (Hamid,

n.d.) in efficient market theory, where relevant information is quickly reflected in stock prices in

the global economic market.

The Islamic stock market has the advantage of transparency and the avoidance of harmful

practices such as usury and gharar, which can create market uncertainty (Bouslama & Lahrichi,

2017). Therefore, in the long run, Islamic stocks tend to be more stable and provide better returns

in a safer market context. However, this study also found that the Islamic stock market has its own

challenges in terms of liquidity and reliance on a few less diverse sectors.

The results of this study indicate the importance of developing policies and regulations that

support the Islamic stock market, especially in the face of global economic uncertainty. One of the

policy suggestions is to expand Islamic investment instruments, such as the issuance of more diverse

sukuk, as well as increase economic literacy and education on Islamic investment to the public in all

global economic markets.More proactive policies that create market transparency and reduce

dependence on external factors are also needed. The development of Shariah-based financial

technology can also help create a more efficient market and minimize volatility (Hisam, 2024).

CONCLUSION

The conclusion of this study conclusively shows that the Islamic stock market in Indonesia,

represented by the Jakarta Islamic Index (JII), showed semi-strong efficiency during the 2019-2024

period. Although public information affects stock price movements, the market is not fully efficient in

absorbing and reflecting all available data. Amid global economic uncertainties, such as the COVID-19

pandemic and geopolitical tensions, the Islamic stock market showed greater stability compared to

the conventional market, underscoring its resilience. Moreover, shariah-compliant investment

principles, which emphasize the support of real assets and prohibit speculative practices, contribute to

competitive returns and make the Islamic stock market a viable alternative during periods of economic

instability.

These findings provide valuable insights for future policy and market development. Investors are

encouraged to include Islamic stocks in their portfolios to reduce volatility risk, while regulators should

increase transparency and implement efficiency standards to foster investor confidence. Issuers should

consistently adhere to Shariah principles to maintain market integrity and attract wider participation.

Future research could explore the integration of advanced financial technologies, such as blockchain,

to further improve market efficiency. In addition, the establishment of a comprehensive global Islamic

index, along with increased cross-border collaboration and financial literacy initiatives, will strengthen

the sustainability and competitiveness of the Islamic stock market in the global economic landscape.

Choiruddin, Safrizal, Dewi Sartika, Addiya Ullami, Romadhan, Arief Safari, Amie Amelia

26 JTUS, Volume 3 No. 1 January 2025

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Choiruddin, Safrizal, Dewi Sartika, Addiya Ullami, Romadhan, Arief Safari, Amie Amelia (2025)

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