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EVALUATING SENSITIVITY OF MACROECONOMIC FACTORS TO STOCK RETURN USING ARBITRAGE PRICING THEORY FRAMEWORK: EVIDENCE FROM INDONESIA STOCK MARKET

Volume: 69  ,  Issue: 1 , January    Published Date: 06 February 2021
Publisher Name: IJRP
Views: 639  ,  Download: 492 , Pages: 302 - 314    
DOI: 10.47119/IJRP100691120211682

Authors

# Author Name
1 Jonathan Evan
2 Yanuar Dananjaya
3 Bertha Silvia Sutejo

Abstract

An investor needs to understand the factors that drive the return of shares in the stock market. The movement of share price caused by many factors and investors revaluated the price based on their own asset valuation method. One of the Asset valuation methods is the Arbitrage Pricing Theory (APT). The APT method is used to test several factors that are systematic. Systematic factors refer to the factors that can not be diversified and giving an impact to the entire sectors on the stock market. This study examines risk factors from macroeconomics that are systematic towards stock return movements. The sample used is stocks that have good capitalization, liquidity, and liquidity so that they can become members of the Kompas100 index in Indonesian Stock Exchange (IDX). This study measures the systematic risk of each economic factor such as inflation, interest rates, GDP rates, and changes in exchange rates for stocks listed on the Kompas100 index with a sample period of 2015 to 2019. The method for data analysis using double regression, which are time-series regression and cross-section regression. The results showed that the risk of inflation and the risk of the GDP rate had a positive but insignificant impact, while the risk of interest rates and the risk of changes in value had a significant negative impact on the value of stock returns and APT can explain 32% of the causes of stock price movement

Keywords

  • IDX
  • Systematic Risk
  • Macroeconomic Risk
  • Arbitrage Pricing Theory Model