Fama and French Five- Factor Study of Stock Market in Indonesia

Buditomo, Bryan and Candra, Steven and Soetanto, Tessa Vanina (2024) Fama and French Five- Factor Study of Stock Market in Indonesia. International Journal of Organizational Behavior and Policy (IJOBP), 3 (1). pp. 39-52. ISSN 2961-9548

	PDF Download (515Kb)
	PDF Download (2696Kb)

Abstract

In general, contemporary finance theories agree that the Fama and French Five-Factor model provides a more comprehensive explanation for average stock returns compared to its predecessors. Previous research on the five-factor model in Indonesia has yieldedinconclusive results, and none of the studies has attempted to compare the significance of the five factors over shorter and longer periods, or even within shorter periods. As a result, the researchers of this study endeavor to ascertain the importance ofthe five elements �the profitability (RMW), market, size (SMB), profitability (RMW), book-to-market (HML), and investment (CMA) factors �to an excess return on the portfolio over shorter and longer periods. The findings indicate that SMB and CMA factorsexhibit statistically insignificant, significantly negative, and significantly positive correlationswith excess portfolio return, respectively, over the three shorter periods and the longer period. A significant negative correlation is observed between the HML factor and excess portfolio return over the longer period, while the relationship is deemed insignificant over the three shorter periods. No significant relationship was found between the RMW factor and excess portfolio return over the (2005-2019) period and two (2010-2014, 2015-2019) periods, but one shorter period is significantly positive

Actions (login required)