Stock Liquidity and Market Capitalization: Investment Challenges in Indonesian Capital Markets

International Journal of Economics and Management Studies

© 2018 by SSRG - IJEMS Journal

Volume 5 Issue 11

Year of Publication : 2018

Authors : Gunawan, Dr. Ernie Hendrawaty, SE, M. Si

10.14445/23939125/IJEMS-V5I11P103

How to Cite?

Gunawan, Dr. Ernie Hendrawaty, SE, M. Si, "Stock Liquidity and Market Capitalization: Investment Challenges in Indonesian Capital Markets," SSRG International Journal of Economics and Management Studies, vol. 5,  no. 11, pp. 11-20, 2018. Crossref, https://doi.org/10.14445/23939125/IJEMS-V5I11P103

Abstract:

The capital market is one of the key drivers of national economic growth. The higher investment activity in the capital market is identical to the development of the capital market. To be able to realize this, it is necessary to make an effort to attract investors to invest in the Indonesian capital market. The attractiveness of the capital market among investors lies in the value of stock liquidity and market capitalization which are strongly influenced by the stability of Indonesia's socio-political environment. This study aims to: 1) Assess the challenges of investment in the Indonesian capital market; and 2) Formulating strategies that can be applied to increase stock liquidity and encourage market capitalization growth. The type of this research is descriptive with qualitative approach. Research data in the form of stock liquidity value and market capitalization are obtained from weekly capital market statistics reports issued by the Financial Services Authority (OJK). The data was then analyzed using qualitative descriptive methods. The results of this study indicate that the challenges faced by investors to invest in the Indonesian capital market include: 1) Low estimated stock returns to be obtained; and 2) The high risk of stock investment. Both challenges can be interpreted as negative signals that hinder investment decisions. Therefore, it is necessary to apply a strategy to increase stock prices in order to encourage increased share liquidity and market capitalization to attract investors to invest in the Indonesian capital market. The strategy can be in the form of strategies for improving internal performance of companies that are listed in the capital market and strategies for creating appropriate public policies to build social, political and economic environmental conducities in order to sustainably grow and develop capital markets in Indonesia.

Keywords:

Capital Market, Stock Liquidity, Market Capitalization, Investment

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