Examining the Role of Inflation Moderation in Mitigating the Impact of Crude Oil Prices on Indonesia's Sharia Stock Market

Abstract

This study investigates the impact of crude oil prices on Indonesia's Sharia stock market, considering inflation as a moderating variable to address existing debates in prior research. Utilizing data from June 2011 to December 2021, including the Indonesian Sharia Stock Index (ISSI), World Texas Intermediate (WTI), and inflation, the study employs Moderated Regression Analysis (MRA) to uncover significant positive correlations between crude oil prices and the Sharia stock market. The findings highlight the moderating role of inflation, indicating that the market weakens when crude oil prices rise alongside inflation and strengthens in the absence of inflationary pressures. Practical implications suggest portfolio diversification for investors to manage associated risks. The study contributes theoretically by introducing additional moderator variables and offers empirical insights, yet acknowledges limitations, advocating for further research to deepen the understanding of the complex relationship between crude oil prices, inflation, and the Sharia Stock Market in Indonesia.