PORTFOLIO RISK AND MARKET UNCERTAINTY CASE STUDY OF THE INDONESIAN STOCK MARKET

Maisur Maisur; Nazariah Nazariah; Ery Jayanti

doi:10.31955/mea.v10i2.7763

Maisur Maisur Universitas Jabal Ghafur, Sigli
Nazariah Nazariah Universitas Jabal Ghafur, Sigli
Ery Jayanti Universitas Jabal Ghafur, Sigli

DOI: https://doi.org/10.31955/mea.v10i2.7763

Keywords: Portfolio Risk, Market Uncertainty, Return Volatility, Economic Uncertainty

Abstract

This study examines the effect of market uncertainty on portfolio risk in the Indonesian stock market. Increasing market volatility and economic uncertainty have become major challenges for investors in managing investment portfolios, making risk assessment an essential aspect of portfolio management. This research adopts a quantitative approach with an explanatory research design using secondary data consisting of daily returns of the Indonesia Composite Index (IDX Composite) during the observation period. The sample was selected using purposive sampling based on data availability and completeness. Portfolio risk is measured using the volatility of portfolio returns, while market uncertainty is proxied by IDX Composite return volatility and economic uncertainty. The data were analyzed using panel data regression with the Fixed Effect Model (FEM), selected based on the Chow and Hausman tests. The empirical results reveal that IDX Composite return volatility has a positive and statistically significant effect on portfolio risk, indicating that greater market fluctuations increase investment risk. Furthermore, economic uncertainty also exerts a positive and significant influence on portfolio risk, suggesting that unstable macroeconomic conditions intensify uncertainty and expose investors to higher levels of systematic risk. These findings support Modern Portfolio Theory by demonstrating that both market volatility and macroeconomic uncertainty are important determinants of portfolio risk. The study provides practical implications for investors, portfolio managers, and policymakers in developing effective risk management and portfolio allocation strategies under uncertain market conditions.

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