ARBITARAGE PRICING THEORY MODEL TESTING ON SHARES IN BANKING SECTOR

Muthia, Fida and Isnurhadi, Isnurhadi (2012) ARBITARAGE PRICING THEORY MODEL TESTING ON SHARES IN BANKING SECTOR. Malaysia Indonesia International Conference on Economics, Management And Accounting . Penerbit UNSRI, Palembang. ISBN 9795874292

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      Abstract

      Many studies empirically shown that both short-term and long term stock return can be predicted by using market variables and interest rate, but no satisfactory theory would argue that the relation between financial markets and the macro economy is entirely in one direction. However, stock prices are usually considered as responding to external forces. In 1976, Ross designed APT as a response to the weakness of CAPM (Capital Asset Pricing Model), in where CAPM predicts only one systematic risk that will affect return which is market risk. While APT assumed there are more systematic risks that affect return of stocks. Making a decision in an investment needs an overall analysis to factors affecting expected return which are the conditions of macro economy in the country. Chen, Roll and Ross (1980) found out that indicators of macro economy affecting return of the stocks are inflation, GNP, investor confidence (estimated with corporate bond premium) and the change of yield curve. Empirical studies reveal that once financial deregulation takes place, the stock markets of a country become more sensitive to both domestic and external factors. Many studies have documented the relationship between macroeconomic variables and stock returns, and they provide different results. This study aims to see and analyze which macroeconomics factors that can affect the stock return in banking sector period of 2005- 2010. Sample used in this study are shares on banking sector that listed in Indonesia Stock Exchange. The macroeconomics variables used in this study are Consumer Price Index, Industrial Production Index, Gold price and Money Supply. The results shows that simultaneously, Consumer Price Index, Industrial Production Index, Gold price and Money Supply do not affect banking sector in Indonesia Stock Exchange. This finding is consistent with theory and a number of empirical studies. And out of 8 companies tested, the APT model only significant in explaining Bank Central Asia, simultaneously but partially only CPI and Money Supply are significant.

      Item Type: Book
      Uncontrolled Keywords: APT, Consumer Price Index, Industrial Production Index, Gold price, Money Supply
      Subjects: H Social Sciences > HG Finance
      Divisions: Faculty of Economics > Department of Management
      Depositing User: Isnurhadi, SE, MBA, Ph.D
      Date Deposited: 19 Mar 2014 11:57
      Last Modified: 19 Mar 2014 17:29
      URI: http://eprints.unsri.ac.id/id/eprint/3653

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