ANALYSIS OF THE DEPENDENCIES COMMODITY PRICES AND STOCK MARKET INDEXES USING COPULA

Abstract

Indonesia is rich in natural resources and occupies an important position in the global raw materials market. The country's rich resources such as oil, coal, nickel, and crude palm oil (CPO) have a significant impact on the economic situation. As one of the world's leading producers and exporters of these raw materials, Indonesia's economic fate is closely linked to price fluctuations. This study uses the copula method to model the dependence between stock and commodity returns and calculates the dependence between commodity prices (oil, coal, nickel, CPO) and Indonesian stock market index (IHSG) The data used for this analysis was sourced from Bloomberg.com, covering the period from 29 September 2021 to 29 September 2023. This study investigates the dynamic dependencies between commodity price returns and the Indonesian stock market index. The results show that the correlations between oil prices and the Indonesian stock index, and between CPO prices and the stock index are generally weak. However, there are exceptions to stock index returns, such as their relatively high dependence on coal and nickel. This diverse research provides valuable insight into the complex interdependencies in Indonesia's financial landscape. Understanding dependence between commodity prices and stock indexes is of great value to investors and policymakers, as it is the basis for making informed decisions to navigate the complex global economy.