scholarly journals The idiosyncratic risk during the Covid-19 pandemic in Indonesia

2021 ◽  
Vol 18 (4) ◽  
pp. 57-66
Author(s):  
Winston Pontoh ◽  
Novi Swandari Budiarso
Keyword(s):  
Stock Returns ◽  
Stock Exchange ◽  
Systematic Risk ◽  
Stable Condition ◽  
Efficient Market Hypothesis ◽  
Idiosyncratic Risk ◽  
Fourth Period ◽  
Public Firms ◽  
Specific Risk ◽  
Close Relationship

Conservatism in the CAPM and L-CAPM standards often emphasizes systematic risk to explain the phenomenon of the risk-return relationship and ignores idiosyncratic risk with the assumption that the risk can be diversified. The effect of the Covid-19 outbreak raises the question of whether the idiosyncratic risk can still be ignored considering that the risk has a close relationship to firm-specific risk. This study sets a portfolio consisting of 177 active public firms in the Indonesia Stock Exchange before and after the Covid-19 pandemic. On portfolio set, idiosyncratic risk is estimated by the standard CAPM and L-CAPM in the observation range from January 2, 2019, to June 30, 2021. The results of the analysis show that L-CAPM and CAPM produce significantly different idiosyncratic risks. Empirical evidence shows that the highest firm-specific risk is in the third period and has a stable condition since the fourth period. This condition is confirmed by regression results that idiosyncratic risk together with systematic risk positively affects stock returns in the fourth period as suggested by the efficient market hypothesis. Uniquely, both systematic risk and idiosyncratic risk based on L-CAPM do not show a significant effect on stock returns in the fifth period, so it is a strong indication that liquidity is an important factor that must be considered in making investments.

scholarly journals THE EFFECT OF CAPITAL STRUCTURE, SYSTEMATIC RISK, AND UNSYSTEMATIC RISK ON STOCK RETURN

2016 ◽  
Vol 14 (2) ◽  
pp. 149
Author(s):  
Nera Marinda Machdar
Keyword(s):  
Capital Structure ◽  
Stock Returns ◽  
Stock Return ◽  
Stock Exchange ◽  
Manufacturing Sector ◽  
Systematic Risk ◽  
Positive Influence ◽  
Public Firms ◽  
Negative Effect ◽  
Sample Firm

The purpose of study was to analyze the effect of capital structure, systematic risk on stock return. The model proposed was evaluated using SPSS statistics 22. Samples in this study are public firms listed on the Indonesian stock Exchange with LQ 45 Index for period 2009-2012. The result of this study showed that (1) The variable of capital structure, systematic risk and unsytematic risk together have a positive influence on stock return; (2) The capital structure has a positive and significant impact on stock return; (3) The systematic risk (beta) has a negative effect on stock return; and (4) The unsystematic risk has a negative effect on stock return. The limitations of this study were as follows: (1) The number of sample used in this study is small, so the result might not be able to describe the overall companies; (2) The study was only investigated the sample firm from manufacturing sector with LQ45 Index; (3) The study calculated stock returns without considering the risks. Therefore, it was necessary to manner. Subsequent research suggested that (1) The number of samples shoulds be increased; (2) The sample of companies in the industry should be expanded; (3) The stock return by calculating the risk adjusted return should be considered.

What Drove the Increase in Idiosyncratic Volatility during the Internet Boom?

2010 ◽  
Vol 45 (5) ◽  
pp. 1253-1278 ◽  
Author(s):  
Jason Fink ◽  
Kristin E. Fink ◽  
Gustavo Grullon ◽  
James P. Weston
Keyword(s):  
Investor Sentiment ◽  
Idiosyncratic Risk ◽  
Idiosyncratic Volatility ◽  
The Internet ◽  
Present Evidence ◽  
Public Firms ◽  
Specific Risk ◽  
Increasing Trend ◽  
Public Firm ◽  
Firm Maturity

AbstractAggregate idiosyncratic volatility spiked nearly fivefold during the Internet boom of the late 1990s, dwarfing in magnitude a moderately increasing trend. While some researchers argue that this rise in idiosyncratic risk was the result of changes in the characteristics of public firms, others argue that it was driven by the changing sentiment of irrational traders. We present evidence that the marketwide decline in maturity of the typical public firm can explain most of the increase in firm-specific risk during the Internet boom. Controlling for firm maturity, we find no evidence that investor sentiment drives idiosyncratic risk throughout the Internet boom.

scholarly journals Systematic illiquidity, characteristic illiquidity, and stock returns: Timeseries analysis

2022 ◽  
Vol 9 (2) ◽  
pp. 72-80
Author(s):  
Soltane et al. ◽  
Keyword(s):  
Emerging Markets ◽  
Stock Returns ◽  
Stock Prices ◽  
Stock Price ◽  
Stock Exchange ◽  
Systematic Risk ◽  
Timeseries Analysis ◽  
The Relationship

The objective of this research is to investigate the relationship between illiquidity and stock prices on the Tunisian stock exchange. While previous researches tended to focus on one form of illiquidity to examine this relationship, our study unifies three forms of illiquidity at the same time. Indeed, we simultaneously consider illiquidity as systematic risk, as a characteristic of the market, and as a characteristic of the stock. The aggregate illiquidity of the market is the average of individual stock illiquidity. The illiquidity risk is the sensitivity of the stock price to illiquidity shocks. Shocks of market illiquidity are estimated by the innovations in the expected market illiquidity. Results show that investors on the Tunisian stock exchange do not require higher returns when they expect a rise of market illiquidity, whereas investors on U.S markets are compensated for higher expected market illiquidity. In addition, shocks of market illiquidity provoke a fall in stock prices of small caps, while large caps are not sensitive to market illiquidity shocks. This differs slightly from results based on U.S. data where illiquidity shocks reduce all stock prices but most notably those of small caps. Robustness tests validate our findings. Our results are consistent with previous studies which reported that the “zero-return” ratio predicts significantly the return-illiquidity relationship on emerging markets.

scholarly journals The Relationship between Systematic Risk and Stock Returns in Tehran Stock Exchange Using the Capital Asset Pricing Model (CAPM)

2014 ◽  
Vol 21 ◽  
pp. 26-35
Author(s):  
Mohsen Mehrara ◽  
Zabihallah Falahati ◽  
Nazi Heydari Zahiri
Keyword(s):  
Asset Pricing ◽  
Stock Returns ◽  
Stock Exchange ◽  
Systematic Risk ◽  
Capital Asset Pricing Model ◽  
Capital Asset Pricing ◽  
Pricing Model ◽  
Capital Asset ◽  
Asset Pricing Model ◽  
The Relationship

One of the most important issues in the capital market is awareness of the level Risk of Companies, especially “systemic risk (unavoidable risk)” that could affect stock returns, and can play a significant role in decision-making. The present study examines the relationship between stock returns and systematic risk based on capital asset pricing model (CAPM) in Tehran Stock Exchange. The sample search includes panel data for 50 top companies of Tehran Stock Exchange over a five year period from 1387 to 1392. The results show that the relationship between systematic risk and stock returns are statistically significant. Moreover, the nonlinear (quadratic) function outperforms the linear one explaining the relationship between systematic risk and stock returns. It means that the assumption of linearity between systematic risk and stock returns is rejected in the Tehran Stock Exchange. So we can say that the capital asset pricing model in the sample is rejected and doesn’t exist linear relationship between systematic risk and stock returns in the sample.

scholarly journals The effect of financial distress on stock returns, through systematic risk and profitability as mediator variables

Accounting ◽  
2021 ◽  
Vol 7 (7) ◽  
pp. 1717-1724 ◽  
Author(s):  
Mulyanto Nugroho ◽  
Donny Arif ◽  
Abdul Halik
Keyword(s):  
Stock Returns ◽  
Indirect Effect ◽  
Financial Distress ◽  
Latent Variables ◽  
Stock Exchange ◽  
Systematic Risk ◽  
P Value ◽  
Moderating Variables ◽  
The Impact ◽  
The Relationship

This study aims to determine the relationship between financial distress and systematic risk, the relationship between financial distress and profitability, the relationship between systematic risk and stock returns, the relationship between profitability and stock returns, and the indirect effect between financial distress and stock returns through systematic risk and company profitability. by collecting data on the Indonesia Stock Exchange on chemical companies and the element industry in 2018-2020. This study was conducted to find out the answers to the impact caused by the global economic turmoil. Using the PLS-SEM method and four latent variables, which are divided into one endogenous variable, two moderating variables and one exogenous variable, it is hoped that it can provide value for the statistical calculation activities carried out. This study uses a quantitative descriptive method with two moderating variables that link financial distress and stock returns. This study produces a specific indirect effect; the financial distress variable significantly impacts Stock Return through systematic risk and profitability variables with a p-value < 0.05. The main finding of this study is the significant impact of world economic turmoil that must be faced by creating systematic risk to convince. Investors and provide education to potential investors.

scholarly journals Testing the Monthly Calendar Anomaly of Stock Returns in Pakistan: A Stochastic Dominance Approach

2019 ◽  
Vol 58 (1) ◽  
pp. 83-104 ◽  
Author(s):  
Abdul Rashid ◽  
Saba Kausar
Keyword(s):  
High Risk ◽  
Stock Returns ◽  
Stochastic Dominance ◽  
Stock Prices ◽  
Stock Exchange ◽  
Abnormal Returns ◽  
Systematic Risk ◽  
January Effect ◽  
Firm Level ◽  
High Beta

In this paper, we first examine the presence of monthly calendar anomaly in Pakistan Stock Exchange (PSX) using aggregate and firm-level monthly stock returns. Secondly, we classify the sample firms into low-beta, medium-beta, and high-beta firms to examine the monthly anomaly of stock returns for firms having different level of systematic risk. By considering the stochastic dominance approach (SDA), we employ the simulation based method of Barrett and Donald (2003) to identify the dominant month over the period from January 2000 to December 2017. We find significant evidence of the existence of the January effect in both firm and market stock returns. We also find that the January effect exists more prominently in both low-risk and high-risk firms categorised based on their systematic risk. On the other end of the continuum, for moderately risky firms, there is strong evidence of the presence of the December effect. One of possible explanations of the January effect is the yearend bonus received in the month of January. Such bonuses are generally used to purchase stocks, causing the bullish trend of stock prices in January. However, the evidence of the January anomaly in both low-beta and high-beta portfolios returns is puzzling, suggesting that investors may invest in both low- and high-risk stocks when enthusiastically investing in stock market. The findings of the paper suggest that investors may get abnormal returns by forecasting stock return patterns and designing their investment strategies by taking into account the January and December effects and the level of systematic risk associated with the firms. JEL Classification: G02, G12, G14 Keywords: Behavioural Finance, Stochastic Dominance Approach, Monthly Anomaly, January Effect, December Effect, TOY Anomaly, Abnormal Returns, KS Type Test, PSX

scholarly journals Impact of return on long-memory data set of volatility of Dhaka Stock Exchange market with the role of financial institutions: an empirical analysis

2017 ◽  
Vol 12 (3) ◽  
pp. 48-60 ◽  
Author(s):  
Muhammad Mahboob Ali ◽  
Aviral Kumar Tiwari ◽  
Naveed Raza
Keyword(s):  
Stock Returns ◽  
Long Memory ◽  
Stock Exchange ◽  
Research Work ◽  
Efficient Market Hypothesis ◽  
Vital Role ◽  
Exchange Market ◽  
Efficient Market ◽  
Data Set ◽  
Real Picture

The current study intends to empirically test a relationship between long-memory features in returns and volatility of Dhaka Stock Exchange market. As such, the study uses the ARFIMA-FIGARCH and FIPARCH structure for the daily data ranging from 15 December 2003 to July 31, 2013 of Dhaka Stock Exchange market index, i.e., DSE General Index (DGEN). The observed indication assembled from long-memory tests supports the occurrence of long memory in Bangladesh stock returns. The study aims at doing research work with long-memory data set, as it provides a superior strategy, as well as gives real picture with short-memory data set. Moreover, the backup indication for existence of long memory in both return and volatility denies the efficient market hypothesis of Fama (1970) that the future return and volatility values are unpredictable. Extra measures ought to be given for the smooth functioning of the Dhaka Stock Exchange market so that both individual and institutional investors can get congenial atmosphere to invest. Authors’ suggested that Bangladesh Bank must play vital role as share market of Bangladesh is dominated by banking shares and in case of other listed shares of the Dhaka Stock Exchange, market authority should deal with transparently and fairly so that the market can be transformed into strong efficient market. This requires suitable directives, groundwork, removing malpractices and also implementation of investors’ friendly decisions. Further, fiscal policy of the country should be pro investor friendly, as well as monetary policy should work as complementary towards investment at stock exchange market as suggested by the authors.

scholarly journals Weak Form Efficiency of the Amman Stock Exchange: An Empirical Analysis (2000-2013)

2015 ◽  
Vol 11 (1) ◽  
pp. 173 ◽  
Author(s):  
Izz eddien N. Ananzeh
Keyword(s):  
Financial Markets ◽  
Stock Returns ◽  
Stock Prices ◽  
Stock Exchange ◽  
Weak Form ◽  
Efficient Market Hypothesis ◽  
Final Conclusion ◽  
Clear Cut ◽  
Amman Stock Exchange ◽  
Daily Returns

<p>The Efficient Market Hypothesis (EMH) has been a lot of debates in the literature of finance because of its important implication, and there is no clear-cut case regarding the efficiency of the financial markets for both developed and emerging markets. This empirical study conducted to examine EMH at the weak form level of Amman stock Exchange (ASE) by using daily observations for the period span from 2000 to 2013. Recent econometric procedures utilized for testing the randomness of stock prices for ASE. The results of serial correlation reject the existence of random walks in daily returns of the ASE, and the unit root tests also conclude the return series of ASE are stationary and inefficient at the weak-level. Also the runs tests verify that the stock returns series on ASE are not random, and our final conclusion reports that the ASE is inefficient at the weak form level. </p>

Stock Returns and Long-range Dependence

2019 ◽  
pp. 097215091986696
Author(s):  
Alexander Ayertey Odonkor ◽  
Emmanuel Nkrumah Ababio ◽  
Emmanuel Amoah- Darkwah ◽  
Richard Andoh
Keyword(s):  
Stock Returns ◽  
Stock Prices ◽  
Long Memory ◽  
Stock Exchange ◽  
Moving Average ◽  
Efficient Market Hypothesis ◽  
Conditional Heteroskedasticity ◽  
Relevant Market ◽  
Figarch Model ◽  
Ghana Stock Exchange

This article studies the long memory behaviour of stock returns on the Ghana Stock Exchange. The estimates employed are based on the daily closing prices of seven stocks on the Ghana Stock Exchange. The results of the autoregressive fractionally integrated moving average-fractionally integrated generalized autoregressive conditional heteroskedasticity (ARFIMA-FIGARCH) model suggest that the stock returns are characterized by a predictable component; this demonstrates a complete departure from the efficient market hypothesis suggesting that relevant market information was only partially reflected in the changes in stock prices. This pattern of time dependence in stock returns may allow for past information to be used to improve the predictability of future returns.

scholarly journals Analisis Pengaruh Beta Saham, Debt To Equity Rasio (DER) terhadap Return On Asset (ROA) Perusahaan di Bursa Efek Indonesia

2019 ◽  
Vol 28 (02) ◽  
pp. 198-212
Author(s):  
Muhammad Ikhsan ◽  
Eko Budi Santoso
Keyword(s):  
Stock Returns ◽  
Stock Exchange ◽  
Systematic Risk ◽  
Net Income ◽  
Financial Leverage ◽  
Return On Equity ◽  
Market Index ◽  
Sample Data ◽  
Equity Ratio ◽  
Excess Stock Returns

Perhitungan rasio keuangan penting bagi perusahaan.. Investor dapat melihat kinerja perusahaan apakah perusahaan berkinerja baik dibandingkan dari rata-rata industri. Rasio adalah ukuran perbandingan antara pos dalam laporan keuangan dengan pos lainnya. Misalnya rasio profitabilitas yaitu Return on Asset makin tinggi ROA makin baik karena Net income makin tinngi. Demikian juga Debt to Equity ratio yaitu  berapa batasan berhutang yang ideal yaitu financial leverage berapa ukuran maksimal sehingga net income maksimal.Resiko sistematis atau Beta saham didapat dari slope hasil regresi antara ekses return saham dengan ekses pasar adalah ukuran resiko juga dalam berinvestasi saham . Resiko adalah hal yang menyimpang dari target yang kita inginkan atau sesuatu pencapaian yangberbeda dari hal atau sesuatu yang kita inginkan atau harapkan. Contoh Resiko berinvestasi adalah jika kita menderita kerugian atau kehilangan pokok yang kita tanankan. Resiko yang mempengaruhi saham di bursa yaitu bisa resikosistematik atau bisa juga resiko unsistematis atau resiko di dalam perusahaan misalnya manajemennya. Resiko sistematisjuga disebut resiko pasar yang menimpa semua saham seperti pengaruh dari luar yaitu inflasi, kurs mata uang atau kebijakan pemerintah.Penelitian ini akan membahas apakah ada pengaruh Debt to equity ratio dan beta saham/ resiko sistematis terhadap nilai ROA karena bagi perusahaan net income adalah penting juga bagi investor untuk membeli saham.Sampel datayang diambil penulis sebanyak 35 macam saham dengan cara mengambil secara acak saham-saham yang ada di Bursa efek Indonesia. Data sampel akan diolah dengan statistik menjadi informasi dalam menjawab permasalahan  dengan  Aplikasi SPSS edisi 19. Hasil penelitian ini yaitu secara bersama-sama variabel Debt to Equity ratio dengan Beta saham mempunyai pengaruh yang signifikan terhadap Return on Equity (ROA) perusahaan di Bursa Efek Indonesia Calculation of finance ratios is important for the company. Investors can view the performance of the company if the company performs well compared to the average industry. The ratio is a measure of the ratio between account in the financial statements with another accounts. For example profitability ratios Return on Assets( ROA) higher is better because Net income increasing. Likewise with Debt to Equity ratio, is how much restriction ideal loanlikethe ideal size of financial leverage to maximum net income. Beta is a systematic risk obtained from the slope of the regression results between excess stock returns with excess return of the capital market index. This is a measure of risk in stock investing. Risk is something that deviates from the target that we want or something less achievement from thing or something we want or expect. Examples of investment risk is if we suffer any loss of money  that we invest. Risks of invest stocks is a systematic risk or a unsystematis risk for examplelike a management in the company. Systematic risk is also called market risk hapend to all shares like outside influence,for example inflation, foreign exchange rates or government policy. This research will address the influence Debt to equity ratio and beta stocks / systematic risk to the value of Return of Asset (ROA) because for the company's net income is important for investors to decide buy shares. Sample data is retrieved author as many as 35 kinds of stocks by taking random stocks that exist in the Indonesian Stock Exchange. The sample data will be processed with statistical information in the answer problems with SPSS applications editions 19. Results of this research is jointly variable Debt to Equity ratio with Beta stocks have a significant influence on Return on Equity (ROA) companies in Indonesia Stock Exchange

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