Composite Behavioral–Fundamental Indexes via PCA for Predicting Indonesia Stock Exchange Excess Returns: An Integrated Anomaly Analysis

Wina Nurfitriani (), Syafrita Ridha Ginting, Lailan Syafrina Hasibuan and Muhammad Simba Sembiring
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Wina Nurfitriani: Universitas Sumatera Utara, Fakultas Vokasi
Syafrita Ridha Ginting: Universitas Sumatera Utara, Fakultas Vokasi
Lailan Syafrina Hasibuan: Universitas Sumatera Utara, Fakultas Vokasi
Muhammad Simba Sembiring: Universitas Sumatera Utara, Fakultas Vokasi

A chapter in Proceedings of the 7th International Conference on Applied Economics and Social Science (ICAESS 2025), 2026, pp 567-583 from Springer

Abstract: Abstract This study integrates traditional valuation metrics and behavioral sentiment indicators into a composite framework to predict excess returns on the Indonesia Stock Exchange (IDX). Seven proxies—price-to-book value, price-to-earnings, turnover ratio, consumer confidence, global sentiment, Fear & Greed Index, and VIX—were standardized and subjected to Principal Component Analysis (PCA), yielding two orthogonal factors: a fundamental valuation factor and a behavioral sentiment factor. These factors explain 46.9% of total variance and were used as predictors in a multiple regression model for IDX excess return. Regression results show both factors have significant negative impacts on returns (β = –0.382, p

Keywords: Principal Component Analysis; Behavioral Finance; Traditional Fundamental Valuation; IDX Excess Return; Market Anomalies (search for similar items in EconPapers)
Date: 2026
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DOI: 10.2991/978-94-6463-990-2_38

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