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Indonesian Capital Market Review
Published by Universitas Indonesia
ISSN : 19798997     EISSN : 23563818     DOI : https://doi.org/10.7454/icmr
Core Subject : Economy,
Economics, Econometrics & Finance
The intent of the Editors of The Indonesian Capital Market Review is to discuss, to explore, and to disseminate the latest issues and developments in Empirical Financial Economics particularly those related to financial frictions in the Emerging Markets. The topics cover capital markets, financial institutions and services, corporate finance, risk modeling and management, market microstructure in financial markets, Islamic finance, behavioral finance, and financial crisis. By submitting your work to the Indonesian Capital Market Review (ICMR), the author(s) automatically agree to transfer the copyright to ICMR, if the submitted paper is accepted for publication.
Arjuna Subject : Ilmu Ekonomi, Ekonometrika dan Keuangan (semua kategori) - Keuangan
Articles 5 Documents
 1 
Search results for , issue "Vol. 11, No. 1" : 5 Documents clear
Bowman’s Paradox: Prospect-Theory-Based Risk-Return Relationship (Some Recent Evidence in Indonesia) Nuir, Rikko Sajjad; Asri, Marwan
Indonesian Capital Market Review Vol. 11, No. 1
Publisher : UI Scholars Hub

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Abstract

There is extensive evidence indicating a negative risk–return relation when a firm’s performance is measured based on accounting measures, such as its Return on Assets (ROA) and Return on Equity (ROE). Previous studies show that the risk-return paradox can be explained by the prospect theory, which predicts that managers’ risk attitudes are different for firms with differing performance. This study will test whether there is a risk-return paradox in the context of Indonesian companies. This study uses ROA and its standard deviation to define return and risk. Industry level and market level median ROA are used as reference points. Three control variables (firm size, leverage as a proxy of firm risk, and company age) are included in the model to increase the robustness of this research. A new sample of nine industries (about 488 firms) over a 10-year period (2008-2017) provides strong evidence that the risk-return paradox exists in Indonesia. In particular, firms which are below their target level are found to be risk takers (Hl) while organizations above their target level are risk averse (H2); moreover, the below-target slope was generally steeper than the above-target slope (H3). These results support the basic propositions of the prospect theory.
High-Frequency Trading Activities and Brokerage Firms Effect : Empirical Evidence From the Indonesia Stock Exchange Barsiano, Redik; Hanafi, Mamduh Mahmadah; Arief, Usman
Indonesian Capital Market Review Vol. 11, No. 1
Publisher : UI Scholars Hub

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Abstract

This research studies the trading activity of type of traders through their brokers. Order imbalance is believed to be a better proxy for explaining trading activity. This paper presents some empirical test that on brokerage level analysis exhibit information paradigm in Indonesia which market makers and specialist are not available. We divide imbalances into groups of samples (all stocks and most liquid stocks), trader type (foreign or domestic) and size of brokerage firm (small to big). Our results show that order imbalances generally have a positive serial correlation for all the traders and brokers analyzed. However, we find that the determinant of order imbalances is a particular phenomenon at the brokerage level, whose results differ from our market-wide analysis. We do not find that previous order imbalances can predict market returns across trader type and brokerage class. In contrast, for the inventory paradigm, the evidence from the brokerage level analysis indicates that information dissemination is induced order imbalance by brokerage house.
The Profitability of Momentum Strategies : A Study of Indonesian Stock Exchange Mosii, Rakhmat Luthfiansyah; Wibowo, Sigit Sulistiyo
Indonesian Capital Market Review Vol. 11, No. 1
Publisher : UI Scholars Hub

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Abstract

We investigate the profitability of style and price momentum strategy in the Indonesian stock market from the year 2000 to 2015. We find the style momentum strategy yields significant positive returns while the price momentum strategy tends to produce negative returns. This result confirms the findings of Lewellen (2002) that style momentum returns are generally stronger than the conventional momentum. The average monthly returns of the double-sorted size-B/M style momentum are ranging from 1.98% to 2.64% and persistent after controlling for market factor using JSX index. Our findings suggest investors should utilize publicly available information such as size and book-to-market ratio on their investment decision in the Indonesian stock market.
Domestic and Foreign Investor Dynamics in Indonesian Stock Exchange : Evidence from 10 Years High-Frequency Data Arroisi, Abdurrahman; Koesrindartoto, Deddy Priatmojo
Indonesian Capital Market Review Vol. 11, No. 1
Publisher : UI Scholars Hub

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Abstract

This study analyses price impact, herding behaviour, and feedback trading of domestic and foreign investors in Indonesia Stock Exchange (IDX) by employing vector autoregressive models using high-frequency transaction data in the period of 2008 – 2017. We find that domestic investors impact return negatively whereas foreign investors have no impact to return. In terms of herding behavior, domestic and foreign investors herd to themselves strongly. Domestic investors reverse-herd to foreign investors in the short-term (1 day) but no consistent pattern in the opposite direction. Regarding feedback trading, both domestic and foreign investors are contrarian in the big and medium cap portfolios but employ momentum strategy in the small cap portfolio. We also find that, in the crisis period, price impact is more pronounced in terms of economic and statistical significance. On the other hand, evidence of herding behavior and feedback trading decreases in market downturns, although with the same patterns overall.
Trading Frequency in KSE – 100 Index Using Pastor and Stambaugh Model Ahmed, Farhan; Ali, Mudassir; Raza, Muhammad; Sibghat, Muhammad
Indonesian Capital Market Review Vol. 11, No. 1
Publisher : UI Scholars Hub

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Abstract

The study aims to asses Pastor & Stambaugh model on Pakistan Stock Exchange (KSE-100 Index) from 2007 to 2017. Four commonly asset pricing factors are tested including market risk, size, value and liquidity premium. Except for the value premium, all factors are statistically found significant. Pertinent to mention that liquidity factor is initially found insignificant since annual returns are calculated. However, after taking most liquid sector during the period (Chemical Sector) the liquidity measure is derived through monthly returns. The result of the study is backed with Utility preference theory because it is observed that investors do prefer more liquid stocks and as a result when pricing securities liquidity factor holds an important position.

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