Aula Ahmad Hafidh Saiful Fikri, Hadri Kusuma, Sunaryati
Purpose: The implementation of the Islamic capital market in Indonesia applies the principles of Islamic capital participation not to be realized in the form of sharia or non-sharia shares, but rather in the form of a stock index that meets the principles of sharia i.e. non-bubble stock. Screening companies through methods applied by authority agencies actually cannot avoid speculative actions that cause speculative bubbles. This research intended to detect the bubble price in the Indonesian Islamic Stock Index.
Design/methodology/approach: An econometrical model as well as an equation, according to monthly data, Indonesian Islamic Stock Idex (IDXS) variable analysed by Right Tail Augmented Dickey Fuller (RTADF) approach. This tool very useful to detect and date-stamping of bubble with more accurately than other tools.
Finding: Our empirical results indicate the existence of rational bubbles in Indonesian Islamic stock market.
Practical Implication: This paper show that even Islamic stock with any prohibition and selective instrument can not avoid from bubble phenomenon. The stock may exhibit sharia value, but if the market play the role, so that these value may fallen away.
Originality/value: The current model or tools to analyse and detect accurately is Right Tail Augmented Dickey Fuller (RTADF), the application of those method in Islamic assets was not avalibale. In order to appropriate with Islamic Principes, the Islamic assets are not allowed contain bubble. This paper introduce that those Principes establish or not using this paper analysis.