Title: Analysis of Efficiency Measurement on the Islamic Stock Exchange
Author: Mau Izhotul Hasanah
Affiliations: Master of Economics Program, Faculty of Economics and Business, Universitas Airlangga , Surabaya, Indonesia
Publisher: Universitas Airlangga
Abstract
The capital market serves as a financial center, which plays a role in the development of a country, one of which is as an investment vehicle for the community. This study aims to measure the level of efficiency of Islamic stock markets in Islamic countries and examine the factors that influence the technical efficiency value in Islamic stock exchanges in Islamic countries. The data used are secondary data with a total of 360 observations from 6 Islamic countries that are members of the OIC in the period January 2014-December 2018. The method used is the Stochastic Frontier Approach (SFA) method. The results of this study indicate that during the study period no stock exchange achieved a perfect efficiency value, but it has approached the number one. Thus, Iran, UAE, Kuwait, Saudi Arabia, Indonesia, and Qatar have efficient Islamic stock exchanges, although not yet perfectly efficient, with an average technical efficiency value of 0.9706 or 97% of the potential output that is being realized. Then, based on ƴ, 38% of random variation in the IMR is due to inefficiency. Therefore, it is necessary to have (1) an expansive policy both in the short term and long term, (2) Investors must be more careful in seeking relevant information and be able to control their emotions (3) when there is low efficiency, technically, on the market capitalization variable side, it is necessary to add issuers to become members of the stock exchange, and on the trading volume side, it is necessary to invite investors to make transactions or invite the public to invest in shares.
Keywords: Islamic Stock Exchange, Islamic Countries, Stochastic Frontier Analysis, Technical Efficiency Value