<span>The Jakarta Islamic Index (JII) is the Islamic Index in Indonesia which is based on Sharia compliance, </span><span lang="EN-AU">changes in market capitalisation and liquidity</span><span>. This objective of the present study is to</span><span lang="EN-AU"> measure</span><span> volatility of </span><span lang="EN-AU">J</span><span>II</span><span lang="EN-AU"> stocks</span><span lang="EN-AU">and compare it with non-JII </span><span>during 2005-2012 by using ARCH and GARCH model</span><span lang="EN-AU">s.</span><span>The previous studies just comparing JII </span><span lang="EN-AU">with other indices, a valid conclusion cannot be drawn as most of stocks belonging to JII are also included in the other indices</span><span>. Therefore in this study we split stocks </span><span lang="EN-AU">listed in Indonesian stock exchange into</span><span> two periods: 2005-2007 which consists of </span><span lang="EN-AU">two</span><span> groups: JII and Non-JII and 2008-2012 which consists of </span><span lang="EN-AU">three</span><span> groups: JII, Sharia and Non-Sharia based on industry sector</span><span lang="EN-AU"> in order to investigate which one has the lowest volatility. </span><span>This study uses </span><span lang="EN-AU">two</span><span> proxies of liquidity for each period namely: turnover and spread</span><span lang="EN-AU"> due t</span><span>o we</span><span lang="EN-AU"> use CAPM extended Fama and French and also augme</span><span>nted</span><span lang="EN-AU"> liquidity to calculate excess return.</span><span lang="EN-AU">I</span><span>n the period </span><span lang="EN-AU">of </span><span>2008-2012 </span><span lang="EN-AU">found that there is </span><span>GARCH (1,0) </span><span lang="EN-AU">in which</span><span> ARCH influences the volatility of return</span><span lang="EN-AU">. Additionally</span><span>, dummy-JII and dummy-Sharia influence negative</span><span lang="EN-AU"> significantly</span><span> toward volatility of return as well. </span><span lang="EN-AU">This finding also</span><span lang="EN-AU">revealed</span><span> that</span><span lang="EN-AU"> JII stocks have lower volatility compared to non-JII in which JII has the lowest leverage compared to Sharia and Non-Sharia. Therefore this result is consistent with the theory in which JII stocks has the lowest volatility due to their characteristic which is Sharia compliance, high market capitalization and high liquidity.</span>