International Journal of Pertapsi
Vol. 2 No. 2 (2024): August 2024

Magic Formula: Can It Be Used to Identify 'Winning Stocks' in the Indonesian Stock Exchange?

Michael, Michael (Unknown)
Sasmitapura, Angga (Unknown)
Faninda, Sandra (Unknown)
Fransisca, Elza (Unknown)
Setiawan, Amelia (Unknown)

Article Info

Publish Date
07 Aug 2024

Abstract

Magic Formula, developed by Joel Greenblatt, offers a simplified investment model that can be used by individuals without extensive financial literacy. This model uses two key metrics: return on capital and earnings yield, to identify potentially profitable stocks. This study tests the effectiveness of the Magic Formula using data from companies listed on the Indonesia Stock Exchange over the past ten years (2011-2021). The results indicate that the Magic Formula yields an average annual return of 39.81%, significantly outperforming the market return, which stands at 6.16%.

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Journal Info
International Journal of Pertapsi
Website

Abbrev

pertapsi

Publisher

Universitas Kristen Petra Surabaya

Subject

Economics, Econometrics & Finance

Description

International Journal of Pertapsi (IJP) is peer–reviewed journal publishing high–quality, original research and published biannually (January and July) by Pertapsi-Indonesia. The aim of IJP is to provide an intellectual platform for the international scholars and to promote interdisciplinary ...