Investor Types and Stock Returns Volatility in Indonesia

Abstract

The purpose of this study is twofold: investigate how differences investor types affect stock return volatility, and examine the role of earnings persistence. This study uses a sample of 130 companies listed on the IDX in 2011-2015 which were tested by multiple regression analysis. The results of regression without interaction show that domestic and foreign institutional investors reduce the stock returns volatility. In contrast,  domestic individual and foreign corporations investors  increase the stock returns volatility. The results of regression with interaction show that earnings persistence is proven to strengthen the negative relationship domestic and foreign institutional investors with stock returns volatility. In contrast, earnings persistence is proven to weaken the positive relationship domestic individual and foreign corporations investors with stock returns volatility. This finding can be concluded that a difference in influence of investor types on the increase or decrease in stock return volatility in emerging countries.

Keywords: stock returns volatility, earnings persistence, institutional investors, corporate investors, individual investors.