LAUSR

Abstract The Indonesian stock market is emerging and very little is known about price discovery mechanisms. This paper addresses this research gap by compiling and utilizing a unique stock-level dataset (consisting of 342 stocks) to examine existence and behaviour of price discovery processes. Using the Indonesian sectoral spot price index, and the Bloomberg Markit iTraxx Asia and the CDX high yield index, we test for price discovery. Our findings suggest that pricing behaviour on Indonesian stock exchange is contributed by the credit risk market. We also note that our findings are robust to a different measure of credit risk.