Profit and Inflation Volatility

Oct 13, 2025 by windailys.com 24 views

The Effect of Profitability, Leverage, and Macroeconomics on Stock Price Volatility in the Construction, Property, and Real Estate Sector Companies Listed on the Indonesia Stock Exchange

Introduction

The Indonesia Stock Exchange (IDX) is one of the largest stock exchanges in Southeast Asia, with a wide range of companies listed across various sectors, including construction, property, and real estate. These sectors are crucial to the country's economic growth, as they provide essential services and infrastructure to the population. However, the stock prices of companies in these sectors can be highly volatile, making it challenging for investors to make informed decisions. This study aims to examine the impact of profitability, leverage, and macroeconomic factors on the volatility of stock prices in companies engaged in the construction, property, and real estate sectors listed on the IDX.

Research Methodology

This study employed a quantitative approach, using financial statements data from 28 companies listed on the IDX during the period 2011 to 2020. The data were obtained from the IDX website (www.idx.co.id) and Yahoo Finance (www.financeyahoo.com). To ensure the validity of the analysis, the data were transformed to meet the normality assumption. The study used multiple linear regression with a random effect model to analyze the data.

Research Results

The results of this study showed that:

Dividend Payment Ratio: There is a negative and significant influence on the volatility of stock prices. This indicates that companies that have a high dividend payment ratio tend to have a more stable stock price, thereby reducing volatility. This finding suggests that investors in the construction, property, and real estate sectors value dividend payments as a measure of a company's financial health and stability.
Profit and Inflation Volatility: Both of these factors have a positive and significant influence on stock price volatility. Significant changes in company profits and inflation rates can cause uncertainty in the market, thereby increasing the volatility of stock prices. This finding highlights the importance of macroeconomic factors, such as inflation, in determining stock price volatility in the construction, property, and real estate sectors.
Leverage and Exchange Rate Fluctuations: The results of this study indicate that investors in the construction, property, and real estate sectors are not too concerned about the high level of debt or exchange rate fluctuations. This suggests that investors in this sector are more focused on profit performance and economic stability rather than debt levels or exchange rate fluctuations.

Additional Analysis and Explanation

Stock price volatility is an essential indicator for investors, as it reflects the level of risk associated with investment in a company. In the context of the construction, property, and real estate sectors, profit stability and macroeconomic factors, such as inflation, are very influential. When inflation is high, people's purchasing power is reduced, and this can affect demand for property and construction products, causing stock price fluctuations.

The high dividend payment ratio also shows that the company has good cash flow and strong solidity, thus providing security for investors. Conversely, if the company's profits fluctuate sharply, this causes uncertainty, which can cause an increase in stock price volatility.

Conclusion

In conclusion, this study found that profitability and macroeconomic factors have an important role in determining the volatility of stock prices in the construction, property, and real estate sectors in Indonesia. Companies that can manage dividend payment ratios and maintain earnings stability will be better able to reduce stock price volatility, providing security for investors. Therefore, a deep understanding of this dynamics is very important for investors in making proper investment decisions in the Indonesian capital market.

Recommendations

Based on the findings of this study, the following recommendations are made:

Investors should focus on companies with high dividend payment ratios: Investors should prioritize companies with high dividend payment ratios, as these companies tend to have more stable stock prices and lower volatility.
Companies should maintain earnings stability: Companies in the construction, property, and real estate sectors should prioritize maintaining earnings stability to reduce stock price volatility and provide security for investors.
Macroeconomic factors should be closely monitored: Investors and companies should closely monitor macroeconomic factors, such as inflation, to anticipate potential stock price fluctuations.

Limitations of the Study

This study has several limitations, including:

Sample size: The sample size of 28 companies may not be representative of the entire construction, property, and real estate sectors listed on the IDX.
Data availability: The study relied on publicly available data, which may not be comprehensive or up-to-date.
Methodology: The study employed a quantitative approach, which may not capture the nuances of the construction, property, and real estate sectors.

Future Research Directions

Future research should aim to:

Examine the impact of other factors: Other factors, such as interest rates, exchange rates, and government policies, should be examined to determine their impact on stock price volatility in the construction, property, and real estate sectors.
Use alternative methodologies: Alternative methodologies, such as qualitative or mixed-methods approaches, should be employed to capture the complexities of the construction, property, and real estate sectors.
Investigate the impact of sector-specific factors: Sector-specific factors, such as the impact of government policies or industry trends, should be investigated to determine their impact on stock price volatility in the construction, property, and real estate sectors.
Q&A: The Effect of Profitability, Leverage, and Macroeconomics on Stock Price Volatility in the Construction, Property, and Real Estate Sector Companies Listed on the Indonesia Stock Exchange

Q: What is the main focus of this study?

A: The main focus of this study is to examine the impact of profitability, leverage, and macroeconomic factors on the volatility of stock prices in companies engaged in the construction, property, and real estate sectors listed on the Indonesia Stock Exchange (IDX).

Q: What are the independent variables used in this study?

A: The independent variables used in this study are:

Dividend Payment Ratio: The ratio of dividend payments to total equity.
Profit Volatility: The standard deviation of net income over a period of time.
Debt to Equity: The ratio of total debt to total equity.
Exchange Rate: The rate at which one currency is exchanged for another.
Inflation: The rate of change in prices of goods and services over time.

Q: What are the findings of this study?

A: The findings of this study are:

Dividend Payment Ratio: There is a negative and significant influence on the volatility of stock prices. This indicates that companies that have a high dividend payment ratio tend to have a more stable stock price, thereby reducing volatility.
Profit and Inflation Volatility: Both of these factors have a positive and significant influence on stock price volatility. Significant changes in company profits and inflation rates can cause uncertainty in the market, thereby increasing the volatility of stock prices.
Leverage and Exchange Rate Fluctuations: The results of this study indicate that investors in the construction, property, and real estate sectors are not too concerned about the high level of debt or exchange rate fluctuations.

Q: What are the implications of this study?

A: The implications of this study are:

Investors should focus on companies with high dividend payment ratios: Investors should prioritize companies with high dividend payment ratios, as these companies tend to have more stable stock prices and lower volatility.
Companies should maintain earnings stability: Companies in the construction, property, and real estate sectors should prioritize maintaining earnings stability to reduce stock price volatility and provide security for investors.
Macroeconomic factors should be closely monitored: Investors and companies should closely monitor macroeconomic factors, such as inflation, to anticipate potential stock price fluctuations.

Q: What are the limitations of this study?

A: The limitations of this study are:

Sample size: The sample size of 28 companies may not be representative of the entire construction, property, and real estate sectors listed on the IDX.
Data availability: The study relied on publicly available data, which may not be comprehensive or up-to-date.
Methodology: The study employed a quantitative approach, which may not capture the nuances of the construction, property, and real estate sectors.

Q: What are the future research directions?

A: The future research directions are:

Examine the impact of other factors: Other factors, such as interest rates, exchange rates, and government policies, should be examined to determine their impact on stock price volatility in the construction, property, and real estate sectors.
Use alternative methodologies: Alternative methodologies, such as qualitative or mixed-methods approaches, should be employed to capture the complexities of the construction, property, and real estate sectors.
Investigate the impact of sector-specific factors: Sector-specific factors, such as the impact of government policies or industry trends, should be investigated to determine their impact on stock price volatility in the construction, property, and real estate sectors.

Q: What are the practical implications of this study?

A: The practical implications of this study are:

Investors should be aware of the factors that affect stock price volatility: Investors should be aware of the factors that affect stock price volatility, such as dividend payment ratios, profit volatility, and macroeconomic factors.
Companies should prioritize earnings stability: Companies in the construction, property, and real estate sectors should prioritize maintaining earnings stability to reduce stock price volatility and provide security for investors.
Macroeconomic factors should be closely monitored: Investors and companies should closely monitor macroeconomic factors, such as inflation, to anticipate potential stock price fluctuations.