How does the six-factor model do in explaining the relationship between return and risk on the Indonesia stock exchange?

Claudia Florensia and Neneng Susanti
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Claudia Florensia: Department of Economics and Business, School of Management, Widyatama University, Bandung, Indonesia
Neneng Susanti: Department of Economics and Business, School of Management, Widyatama University, Bandung, Indonesia

International Journal of Research in Business and Social Science (2147-4478), 2020, vol. 9, issue 7, 93-107

Abstract: This study aims to determine the effect of six-factor (market return, firm size, value, profitability, investment, human capital) on excess return in companies with shares listed in LQ45 for the 2015-2019 period. The population of this study consists of 45 LQ45 companies listed on the Indonesia Stock Exchange (IDX). The purposive sampling method is the sample selection method that is used in this study. As a result, it shows that there are 26 companies that fit the criteria and taken as samples. Furthermore, the data analysis method that is used in this study is the panel data regression model. Based on the results of this study, it is showed that partially, market return (X1), firm size (X2), profitability (X4), and investment (X5) have a significant positive effect on the excess return of companies listed in LQ45 for the 2015-2019 period. Whereas, value (X3) and human capital (X6) do not have a significant effect on the excess return of companies listed in LQ45 for the 2015-2019 period partially. Another result also shows that simultaneously or as a whole, six-factors (market return, firm size, value, profitability, investment, human capital) have a significant effect on the excess return of companies listed in LQ45 for the 2015-2019 period. Key Words: Six-Factor; Market Return; SMB; HML; RMW; CMA; LBR; Excess Return

Date: 2020
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