Accuracy Level Analysis of Pricing Model on State-Owned Enterprises Stocks
Kurniawan Putra (a*), Dony Abdul Chalid (b)

Universitas Indonesia

Abstract

This study evaluates and compares the performance of the Capital Asset Pricing Model and Fama-French three-Factors (FF3), to explain the excess returns on state-owned companies listed on the Indonesia Stock Exchange. The results showed that the Fama-French Three Factor Model was better to the Capital Asset Price Model to explain the excess returns in Indonesian state-owned companies. This study uses asset price factors of 2 x 3 types and excess returns of 6 Size-B / M as the dependent variable. This study uses Ordinary Least Square (OLS) with daily time series data from 29 July 2019 to 31 October 2019. Based on the adjusted R-square average of the two models, FF3 explains that the excess returns in the portfolio are better than the CAPM.

Keywords: Capital Asset Pricing Model, Fama-French Three Factor Model, Market Return, Risk Free Rate, Size, Book-to-market equity

Topic: Financial Management and Accounting