US TRADE POLICY UNCERTAINTY AND INDONESIAN SYARIAH STOCK VOLATILITY: A COMPARISON OF ISSI AND IHSG

This study examines whether uncertainty surrounding United States trade policy contributes to stock market volatility in Indonesia and whether the Indonesia Sharia Stock Index (ISSI) responds differently from the broader Jakarta Composite Index (IHSG). The study uses monthly data from January 2021 to December 2025, providing 60 observations for each index. Monthly volatility is measured as the standard deviation of daily logarithmic returns within each month. The analysis employs dynamic regressions with heteroskedasticity- and autocorrelation-consistent (HAC) standard errors, supplemented by a paired moving-block bootstrap, while controlling for volatility persistence, the VIX, S&P 500 returns, and movements in the Indonesian rupiah exchange rate. In the level specification, trade policy uncertainty has a positive coefficient for both indices. However, this finding is not robust: the uncertainty proxy does not satisfy the stationarity diagnostics, and the bootstrap confidence intervals include zero. When the model is estimated in first differences, the uncertainty coefficients are statistically insignificant. A direct comparison of the ISSI and IHSG coefficients also reveals no convincing difference in their sensitivity. These findings challenge the assumption that Sharia-screened equities provide investors with greater protection against trade policy uncertainty than the overall market. The study contributes a side-by-side assessment that combines volatility measures constructed from daily data, explicit time-series diagnostics, and a direct test of the coefficient difference. For portfolio management, the findings highlight the need to consider the shared international risk exposures of both indices rather than assuming that Sharia screening alone insulates equities from trade policy uncertainty.