THE RISK OF BEING UNSYSTEMATIC AND STOCK RETURNS: THE EMPIRICAL TEST ON CAPITAL VALIDITY OF CAPITAL ASSET PRICING MODEL
The objective of this research is to analyze the effect of idiosyncratic risk to stock return on Indonesia Stock Exchange. To test these variables, the study applied two pass regression with time series data of stock return LQ45 and stock price index from January 2014 - December 2014. The estimation...
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| Format: | Article |
| Language: | English |
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Department of Management, Faculty of Economics and Business, Universitas Surabaya
2014-09-01
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| Series: | Manajemen dan Bisnis |
| Subjects: | |
| Online Access: | https://www.journalmabis.org/mabis/article/view/242 |
| _version_ | 1797937860227104768 |
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| author | Arfiana Rachel |
| author_facet | Arfiana Rachel |
| author_sort | Arfiana Rachel |
| collection | DOAJ |
| description | The objective of this research is to analyze the effect of idiosyncratic risk to stock return on Indonesia Stock Exchange. To test these variables, the study applied two pass regression with time series data of stock return LQ45 and stock price index from January 2014 - December 2014. The estimation method used in the first pass regression was selected by characteristics of the return data, that is EGARCH (1,1) method for heterokedasticity data and Ordinary Least Squares for constant variance data. Specifications on the second pass regression models using cross section data, that is month by month cross sectional regression of 30 stock portfolios, which aim to identify unsystematic risk role in explaining the behavior of the return from stock portfolio. The findings of this study indicate that unsystematic risk has insignificant effect on stock return. These findings support the statement postulated in Capital Asset Pricing Model (CAPM), that the only relevant risk in explaining the return of stock only systematic risk, so there is no statistical evidence is strong enough to declare that the unsystematic risk can play a role in explaining the movement of stock return. |
| first_indexed | 2024-04-10T18:51:53Z |
| format | Article |
| id | doaj.art-d8aed5adac34479dade08cfeffaf2ede |
| institution | Directory Open Access Journal |
| issn | 1412-3789 2477-1783 |
| language | English |
| last_indexed | 2024-04-10T18:51:53Z |
| publishDate | 2014-09-01 |
| publisher | Department of Management, Faculty of Economics and Business, Universitas Surabaya |
| record_format | Article |
| series | Manajemen dan Bisnis |
| spelling | doaj.art-d8aed5adac34479dade08cfeffaf2ede2023-02-01T07:29:33ZengDepartment of Management, Faculty of Economics and Business, Universitas SurabayaManajemen dan Bisnis1412-37892477-17832014-09-0113210.24123/jmb.v13i2.242205THE RISK OF BEING UNSYSTEMATIC AND STOCK RETURNS: THE EMPIRICAL TEST ON CAPITAL VALIDITY OF CAPITAL ASSET PRICING MODELArfiana Rachel0Faculty of Economics, Universitas Katolik Indonesia Atma JayaThe objective of this research is to analyze the effect of idiosyncratic risk to stock return on Indonesia Stock Exchange. To test these variables, the study applied two pass regression with time series data of stock return LQ45 and stock price index from January 2014 - December 2014. The estimation method used in the first pass regression was selected by characteristics of the return data, that is EGARCH (1,1) method for heterokedasticity data and Ordinary Least Squares for constant variance data. Specifications on the second pass regression models using cross section data, that is month by month cross sectional regression of 30 stock portfolios, which aim to identify unsystematic risk role in explaining the behavior of the return from stock portfolio. The findings of this study indicate that unsystematic risk has insignificant effect on stock return. These findings support the statement postulated in Capital Asset Pricing Model (CAPM), that the only relevant risk in explaining the return of stock only systematic risk, so there is no statistical evidence is strong enough to declare that the unsystematic risk can play a role in explaining the movement of stock return.https://www.journalmabis.org/mabis/article/view/242stock return, beta, idiosyncratic risk, capm |
| spellingShingle | Arfiana Rachel THE RISK OF BEING UNSYSTEMATIC AND STOCK RETURNS: THE EMPIRICAL TEST ON CAPITAL VALIDITY OF CAPITAL ASSET PRICING MODEL Manajemen dan Bisnis stock return, beta, idiosyncratic risk, capm |
| title | THE RISK OF BEING UNSYSTEMATIC AND STOCK RETURNS: THE EMPIRICAL TEST ON CAPITAL VALIDITY OF CAPITAL ASSET PRICING MODEL |
| title_full | THE RISK OF BEING UNSYSTEMATIC AND STOCK RETURNS: THE EMPIRICAL TEST ON CAPITAL VALIDITY OF CAPITAL ASSET PRICING MODEL |
| title_fullStr | THE RISK OF BEING UNSYSTEMATIC AND STOCK RETURNS: THE EMPIRICAL TEST ON CAPITAL VALIDITY OF CAPITAL ASSET PRICING MODEL |
| title_full_unstemmed | THE RISK OF BEING UNSYSTEMATIC AND STOCK RETURNS: THE EMPIRICAL TEST ON CAPITAL VALIDITY OF CAPITAL ASSET PRICING MODEL |
| title_short | THE RISK OF BEING UNSYSTEMATIC AND STOCK RETURNS: THE EMPIRICAL TEST ON CAPITAL VALIDITY OF CAPITAL ASSET PRICING MODEL |
| title_sort | risk of being unsystematic and stock returns the empirical test on capital validity of capital asset pricing model |
| topic | stock return, beta, idiosyncratic risk, capm |
| url | https://www.journalmabis.org/mabis/article/view/242 |
| work_keys_str_mv | AT arfianarachel theriskofbeingunsystematicandstockreturnstheempiricaltestoncapitalvalidityofcapitalassetpricingmodel AT arfianarachel riskofbeingunsystematicandstockreturnstheempiricaltestoncapitalvalidityofcapitalassetpricingmodel |