Megananda, Pandu and Bustaman, Yosman and Nurdayadi, Nurdayadi (2020) Analysis of Three-Factor Model in the Financial Sector of The indonesian Stock Exchange. Bachelor thesis, Swiss German University.

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Abstract

A multi-factor model is a financial model that is used to determine which factor plays a significant or influential role in affecting a certain portfolio’s returns. There are several problems that this paper aims to solve such as the asymmetric risk-reward ratio and the lack of influence of fundamental factors towards market returns. Accordingly, the objective of this paper is to prove the existence of risk-adjusted return and see whether the variables are statistically significant. Both objectives are accomplished by performing a regression using Fama and French Three-Factor model. The sample used in the study is publicly listed companies in the financial sector from 2008 to 2018. Previous studies have found that the use of three- and four-factor model to be significant in conclusion and practical in application. In brief, there are two steps that must be performed. First is to obtain the values that are used for the variables. Then the second step is to use the values from the first variable as the basis to construct the portfolios. Our findings of this study are: first, there is a risk-adjusted return (portfolio Alpha is positive), and second, the slope coefficients are -2.4 (MKT), -12.3 (SMB), and -4.9 (HML). Furthermore, one of the variables, SMB, which represents company size, is statistically significant.

Item Type:	Thesis (Bachelor)
Uncontrolled Keywords:	Three-Factor Model; Fama and French; Portfolio Alpha; CAPM Alpha; Market Capitalization; BM ratio; Financial Sector; Jakarta Composite Index
Subjects:	H Social Sciences > HF Commerce > HF5601 Accounting H Social Sciences > HG Finance H Social Sciences > HG Finance > HG4551 Stock exchanges
Divisions:	Faculty of Business Administration and Communication > Department of Accounting
Depositing User:	Faisal Ifzaldi
Date Deposited:	02 Nov 2020 14:09
Last Modified:	02 Nov 2020 14:09
URI:	http://repository.sgu.ac.id/id/eprint/1930

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