| Summary: | Fama and French (1992) found in their study that CAPM beta (market risk) is
not the only factor explained the variation of stock return. Beside CAPM beta, firm
size (market equity) and book to market equity have a significant power to explain
the variation of stock return. Further, Fama and French (1992) found that during the
periode of 1963-1990 the role of beta as the explanatory factor of stock return
variation has been dissapeared. Besides, small firm�s stock return outperformed large
firm�s, which is known as size effect. At the other hand, value stock, with higher
book to market equity ratio has also outperformed growth stock which has lower
book to market equity ratio. This is known as value effect.
This study intends to evaluate the existent of size effect and value effect at
Indonesia Stock Exchange during 2005-2011 periods. Along with it, this study also
intend to evaluate the relation of market risk, size and value to stock return, as in
Fama and French multy factor. Since during the observation periode there�s global
economic crisis, hence the difference of size and value effect and the existance of
Fama and French multy factor before and after the crisis will be evaluated.
The result shows that size effect exists at Indonesia Stock Exchange during
July 2005-June 2008 periode, that�s before global economic crisis. But, during July
2009-June 2011 the existance of size effect is inconclusive. Value effect exists before
and after the global economic crisis. All together, market, size and value become the
explanatory factor to the stock return variation at Indonesia Stock Exchange.
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