PEMILIHAN MODEL ASSET PRICING
ABSTRACT: The Capital Asset
Pricing Model (CAPM) has dominated finance theory for over thirty years; it
suggests that the market beta alone is sufficient to explain stock returns.
However evidence shows that the cross section of stock returns cannot be
described solely by the one-factor CAPM. Therefore, the idea is to add other factors
in order to complete the beta in explaining the price movements in the stock
exchange. The Arbitrage Pricing Theory (APT) has been proposed as the first multifactor
successor to the CAPM without being a real success. Later, researchers support
that average stock returns are related to some fundamental factors such as
size, book-to-market equity and momentum. Alternative studies come as a
response to the poor performance of the standard CAPM. They argue that investors
choose their portfolio by using not only the first two moments but also the
skewness and kurtosis. The main contribution of this paper is comparison
be-tween the CAPM, the Fama and French asset pricing model (TPFM) and the Four
Factor Pricing Model (FFPM) adding the third and fourth moments to calculate
expected return of non-financial Indonesian listed firms. The selection of the
best model is based on the highest coefficient of determination. The
kurtosis-FFPM turned out to be the best model.
Keywords: stock expected return, CAPM, TFPM, FFPM,
skewness, kurtosis
Penulis: Rowland Bismark
Fernando Pasaribu
Kode Jurnal: jpmanajemendd100144
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