1.0 IntroductionBased on the 2013 OECD Factbook: Economic, Environmental and Social Statistics, Foreign direct investment defined as cross-border investment made by others investors in the economy who aimed to achieve long-term gains. the interest or benefit of other countries that need capital for their development. FDI is divided into 3 categories such as horizontal FDI, platform FDI and vertical FDI. Kimberly states that foreign direct investment is a global economic growth that applies to all countries, such as developing and emerging countries. The main objective of FDI is that the investor from other countries invests the surplus capital in other countries for profit. At the same time, developing countries will enjoy more advantages in capital, technology transfer and human skills that increase the development of countries. The developing country always needs funds or financial assistance from all resources to develop their country. FDI is carried out by multinational companies for expansion to developing countries depending on the situation of the country. What is foreign direct investment (FDI)? Foreign direct investment is the investment made by a multinational company in another country through funds or investments that invest directly in the company. Foreign direct investment is different from indirect investments such as portfolio flows or shares listed on a country's stock exchange. FDI is divided into horizontal, vertical and conglomerate. In addition to this, FDI can be used to take over businesses from other countries and to enter new locations. The International Monetary Fund (1977) mentioned that FDI is an investment aimed at acquiring a lasting interest in an enterprise operating in an economy by the investor whose interest is to have...... middle of paper ......provide just as the introduction and objective of our research, while chapter 2 will present an overview of literature review related to previous study on the relationship between stock price and foreign direct investment. In Chapter 3, the methodology of our study will serve as a guideline for Chapters 4 and 5. In chapters 4 and 5, we will present the result and draw a conclusion based on the result we obtain. 1.6 Methodology In this study, we estimate the relationship between stock market and FDI which are in the long-run relationship using Johnansen cointegration approach. Furthermore, we measure the short-run relationship between stock market and FDI using the var approach. The variables of this study are stock trading volume, exchange rate, inflation rate and foreign direct investment from Indonesia, China and Malaysia.