The effect of country risk, inflation rate, and gross domestic product on stock market indices in ASEAN-4 countries

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Abstract

The aim of this study is to prove whether country risks and inflation rates affected gross domestic product (GDP) and stock market indices in Indonesia, Malaysia, the Philippines, and Thailand from 2014 to 2022. Based on the phenomena that have been found, the type of research used is explanatory and descriptive studies, while to find out the relationship between the variables studied, quantitative methods are used. The population of this study is countries in Southeast Asia, the sample was generated using purposive sampling. The findings of this study are that the rule of law has a significant impact on the stock market indices. This research is a continuation of previous research, namely from Mohamad et al. (2020), Akter and Smith (2021), and also from Kabir et al. (2023), with the addition of a number of variables and new mathematical models. This research is important because: first, it can encourage governments in Southeast Asia to uphold the rule of law; second, for those who intend to invest in a country in Southeast Asia, it can consider the rule of law as an important factor for the long-term growth of stock indices.

Keywords: Investment, Risk, Stock Market Indices, Gross Domestic Product, Rule of Law

Authors’ individual contribution: Conceptualization — B.B.T.; Methodology — B.B.T. and V.I.D.; Software — A.S.L.; Validation — A.S.L.; Formal Analysis — B.B.T.; Investigation — B.B.T.; Resources — B.B.T.; Data Curation — V.I.D.; Writing — Original Draft — B.B.T.; Writing — Review & Editing — B.B.T., A.S.L., and V.I.D.; Visualization — A.S.L. and V.I.D.; Supervision — A.S.L.; Project Administration — V.I.D.; Funding Acquisition — B.B.T.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: F21, F43, G32, G38

Received: 04.01.2025
Revised: 10.04.2025; 27.06.2025
Accepted: 24.07.2025
Published online: 28.07.2025

How to cite this paper: Tjandrasa, B. B., Lehman, A. S., & Dewi, V. I. (2025). The effect of country risk, inflation rate, and gross domestic product on stock market indices in ASEAN-4 countries. Risk Governance & Control: Financial Markets & Institutions, 15(3), 103–114. https://doi.org/10.22495/rgcv15i3p8