LOCAL EXTREMA IN THE JAKARTA COMPOSITE INDEX: AN ANALYSIS BASED ON THE FOKKER-PLANCK EQUATION

Abstract

This study analyzes the behavior of local extrema in the Jakarta Composite Index (JCI), with the JCI seen as a stochastic process. The author employs the Fokker-Planck Equation as the analytical tool, based on the generalized logistic Stochastic Differential Equation. This study shows that local extrema are actually 'moving boundaries' which absorb or repel a stochastic process temporarily before the process moves to higher or lower boundaries. This study presents preliminary analysis and statistics on the behavior of local extrema as moving boundaries in the JCI. Further theoretical, analytical and empirical studies are needed to better understand the behavior.