Title: The Influence of the Carthart Four Factor Model and Three Moment Capm on Excess Stock Returns in Indonesia
Author: Yossy Imam Candika
Item Type: Thesis (Thesis)
Affiliations: Master of Management Science Study Program, Faculty of Economics and Business, Universitas Airlangga , Surabaya, Indonesia
Publisher: Universitas Airlangga
Abstract
When investing in an asset, the ability to estimate the asset's rate of return (asset pricing) is crucial for investors. Investors expect higher returns if they face higher risks. This study uses the Carhart (1997) model, which includes market return, size, book-to-market, and momentum. Furthermore, this study also uses the three-moment CAPM model, which uses skewness to explain variations in stock excess returns. The purpose of this study is to test and analyze the effect of the Carhart Four-Factor Model and Three-Moment CAPM on stock excess returns in Indonesia. The dependent variable in this study is stock excess returns. The independent variables in this study are the Carhart four-factor model and the Three-moment CAPM. The population in this study is all non-financial companies listed on the Indonesia Stock Exchange (IDX) for the period 2010-2012. The sample used is 150 companies. To test the model in this study, 10 portfolios will first be formed by combining size-book-to-market and size-moment. This study uses multiple regression analysis using 10 regression analysis models based on 10 portfolio combinations. The statistical test results of the excess market return variable on stock returns in 10 stock portfolios indicate a significant positive effect in all models. The SMB variable has a significant positive effect on portfolio returns in five models. The HML variable has a significant positive effect on portfolio returns in six models. The UMD variable has a significant positive effect on portfolio returns in two models. The skewness variable does not have a significant positive effect on any of the models studied.
Keywords: stock excess return, Carhart four factor model, three moment CAPM, market return, size, book to market, momentum, and skewness.