Implementation of Capm, Fama-French Three-Factor, and Five-Factor in Indonesia Stock Exchange and Cement Industry Sector
Weighting Average Cost of Capital (WACC) plays a critical role as a discounting factor of the corporate valuation process's estimated future free cash flow by highly influencing the valuation process. It consists of three components, namely cost of debt, cost of equity, and proportion of capit...
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| Format: | Article |
| Language: | English |
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EconJournals
2022-03-01
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| Series: | International Journal of Economics and Financial Issues |
| Subjects: | |
| Online Access: | https://econjournals.com/index.php/ijefi/article/view/12805 |
| _version_ | 1828025373893328896 |
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| author | Dewa Nyoman Wiryasantika Wedagama Dedi Budiman Hakim Bambang Juanda Trias Andati |
| author_facet | Dewa Nyoman Wiryasantika Wedagama Dedi Budiman Hakim Bambang Juanda Trias Andati |
| author_sort | Dewa Nyoman Wiryasantika Wedagama |
| collection | DOAJ |
| description |
Weighting Average Cost of Capital (WACC) plays a critical role as a discounting factor of the corporate valuation process's estimated future free cash flow by highly influencing the valuation process. It consists of three components, namely cost of debt, cost of equity, and proportion of capital structure. Costs of debt and capital structure are easily calculated due to data stability and less volatility. Meanwhile, the cost of equity is difficult to determine due to assumption, the period taken, the method applied, and complexity. Many assets pricing methods are used to determine the required rate of return in equity, namely CAPM, Fama French Three-Factor (FF3F), and Fama French Five-Factor (FF5F). These three asset pricing models are used to determine the models with strong explanatory factors on equity return to portfolios developed from sorting FF5F factors and individual equity of four cement companies publicly listed in the Indonesia Stock Exchange (IDX).
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| first_indexed | 2024-04-10T13:00:20Z |
| format | Article |
| id | doaj.art-471db58b64d14d9aa7e5604ff4e600fe |
| institution | Directory Open Access Journal |
| issn | 2146-4138 |
| language | English |
| last_indexed | 2024-04-10T13:00:20Z |
| publishDate | 2022-03-01 |
| publisher | EconJournals |
| record_format | Article |
| series | International Journal of Economics and Financial Issues |
| spelling | doaj.art-471db58b64d14d9aa7e5604ff4e600fe2023-02-15T16:13:12ZengEconJournalsInternational Journal of Economics and Financial Issues2146-41382022-03-0112210.32479/ijefi.12805Implementation of Capm, Fama-French Three-Factor, and Five-Factor in Indonesia Stock Exchange and Cement Industry SectorDewa Nyoman Wiryasantika Wedagama0Dedi Budiman Hakim1Bambang Juanda2Trias Andati3School of Business, Bogor Agricultural University, Bogor Indonesia.Department of Economics, Bogor Agricultural University, Bogor, IndonesiaDepartment of Economics, Bogor Agricultural University, Bogor, IndonesiaSchool of Business, Bogor Agricultural University, Bogor, Indonesia Weighting Average Cost of Capital (WACC) plays a critical role as a discounting factor of the corporate valuation process's estimated future free cash flow by highly influencing the valuation process. It consists of three components, namely cost of debt, cost of equity, and proportion of capital structure. Costs of debt and capital structure are easily calculated due to data stability and less volatility. Meanwhile, the cost of equity is difficult to determine due to assumption, the period taken, the method applied, and complexity. Many assets pricing methods are used to determine the required rate of return in equity, namely CAPM, Fama French Three-Factor (FF3F), and Fama French Five-Factor (FF5F). These three asset pricing models are used to determine the models with strong explanatory factors on equity return to portfolios developed from sorting FF5F factors and individual equity of four cement companies publicly listed in the Indonesia Stock Exchange (IDX). https://econjournals.com/index.php/ijefi/article/view/12805ValuationWACCCost of equityCAPMFama-French Three FactorsFama-French Five Factors |
| spellingShingle | Dewa Nyoman Wiryasantika Wedagama Dedi Budiman Hakim Bambang Juanda Trias Andati Implementation of Capm, Fama-French Three-Factor, and Five-Factor in Indonesia Stock Exchange and Cement Industry Sector International Journal of Economics and Financial Issues Valuation WACC Cost of equity CAPM Fama-French Three Factors Fama-French Five Factors |
| title | Implementation of Capm, Fama-French Three-Factor, and Five-Factor in Indonesia Stock Exchange and Cement Industry Sector |
| title_full | Implementation of Capm, Fama-French Three-Factor, and Five-Factor in Indonesia Stock Exchange and Cement Industry Sector |
| title_fullStr | Implementation of Capm, Fama-French Three-Factor, and Five-Factor in Indonesia Stock Exchange and Cement Industry Sector |
| title_full_unstemmed | Implementation of Capm, Fama-French Three-Factor, and Five-Factor in Indonesia Stock Exchange and Cement Industry Sector |
| title_short | Implementation of Capm, Fama-French Three-Factor, and Five-Factor in Indonesia Stock Exchange and Cement Industry Sector |
| title_sort | implementation of capm fama french three factor and five factor in indonesia stock exchange and cement industry sector |
| topic | Valuation WACC Cost of equity CAPM Fama-French Three Factors Fama-French Five Factors |
| url | https://econjournals.com/index.php/ijefi/article/view/12805 |
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