Uji Empiris Model Asset Pricing Lima Faktor Fama-French Di Indonesia

Abstract

The main purpose of this study is to evaluate and compare the performances of the Fama-French three-(FF3) and five-factor (FF5) models in the Indonesia stock market. This study also examines whether book-to-market factor (HML) is redundant in explaining the portfolio excess returns in Indonesia. This study employs asset pricing factor of the 2 x 3 sorts and excess returns of 25 Size-B/M, 25 Size-OP, dan 25 Size-Inv portfolios as dependent variables. This study employs Ordinary Least Square (OLS) with monthly time-series data from 2000 to 2015. Based on the average adjusted R 2 from the two models, FF5 explains portfolio excess return variations better than FF3, although the profitability and investment factors only display weak effect on the excess returns. If we refer to Merton's (1973) zero-intercept criterion, the both modelsare not valid in Indonesia, because most intercepts are significant in each set of 25 portfolios. We also find that book-to-market factor is redundant in describing the variation of returns in Indonesia. The test of intercept difference between Indonesia and The US indicates that there are differences of abnormal return and market efficiency in both countries.

The effects of Fama-French five factor and momentum factor on Islamic stock portfolio excess return listed in ISSI

“…On the other hand, companies with high ratios will reflect inefficient market conditions which also will expose risk for investors. Sutrisno and Ekaputra (2016) and Fama and French (2015) also mentioned that book-to-market which is proxied by High Minus Low (HML) has a positive relationship to stock portfolio excess returns. H3: book-to-market equity has a positive effect on ISSI's stock portfolio excess return.…”

“…The higher the company's profit, the higher the rate of return obtained by investors is. Profitability which is proxied by Robust Minus Weak (RMW) is the difference between the average return on two portfolios that have high operating profitability and the average return on two portfolios that have low operating profitability every month (Sutrisno & Ekaputra 2016). Research by Fama and French (2015) and Chiah, Chai, and Zhong (2015) indicated that profitability has a positive relationship with the return.…”

“…The higher the rate of return obtained on retained earnings, the greater the growth rate is (Brigham & Ehrhardt, 2015). Fama and France (2015); Chiah, Chai, and Zhong (2015); Sutrisno and Ekaputra (2016) show that investment has a positive effect on excess return. H5: Investment has a positive effect on ISSI's stock portfolio excess return.…”

“…Huang (2019) confirmed that the FF five-factor model is superior to other traditional asset pricing models in explaining individual stock returns in China. Indonesian researchers found that FF five-factor model better explains the excess return of a stock portfolio in Indonesia if compared to the FF three-factor model (Sutrisno & Ekaputra, 2016;Wijaya, Murhadi, & Utami, 2015). In contrast, Kubota and Takehara (2018) found that FF five-factor model underperforms in asset returns, that RMW profitability and CMA investment are not statistically significant when GMM tests are carried out by Hansen-Jagannathan measurements.…”

The Dominant Country for Regional Portfolios: Evidence from Listed Companies in Southeast Asia’s Emerging Market

“…22 years after the threefactor Fama-French model was developed, Fama and French introduced the model by adding two other factors namely profitability and investment [2]. It has been shown that the Fama-French Five Factor Model describes the variation in portfolio returns better than the three-factor model, although profitability and investment factors have only weak effects on excess returns [17].…”