Idiosyncratic Risk on Stock Performance in Indonesia Stock Exchange
Andiasa Adesia (a), Bona Christanto Siahaan (b)
a) MM Universitas Indonesia
b) MM Universitas Indonesia
Abstract
In this paper we present new evidence on the relation between idiosyncratic risk and stock performance performance using Fama French three factor model. We show that idiosyncratic risk is not eliminated in excess stock returns, and show mixed result relation between excess stock return and idiosyncratic risk. We use a unique data set containing daily returns of 80 Indonesia equity of KOMPAS100 index on a 7-year period to measure stock performance. We formed portfolios based on market capitalization and book to market value. We found that idiosyncratic risk has positive relation with excess stock return specifically in portfolio of second tier size and portfolio with highest and lowest book to market value.
Keywords: Idiosyncratic Risk; Fama French Three Factor Model;
Topic: Financial Management and Accounting