Fama-French Five-Factor Model Analysis on Valuation of Bank Stock Returns

Syarief Fauzie, Ranika Elizabeth Siagian

2018

Abstract

The purpose of this study was to examine the ability of the Fama-French Five-Factor Model in providing explanatory power to banking stock excess returns on the Indonesia Stock Exchange. In examining the validity of the model, this study was conducted to determine how the influence of five factors consists of market risk, book-to-market ratio, market capitalization, profitability and investment in excess return of banking stock portfolio. The test in this study uses time series data by analyzing multiple linear regression for each portfolio that is formed based on the Fama-French five-factor model. The data used in this analysis are the daily average return of the bank's stock portfolio every month, the average daily market return every month, and the interest rate of Bank Indonesia Certificate as the rate for risk-free investments every month in the period from January 2012 to December 2017. The results show that the use of variable operating profit and investment gives anomalous results to banks that have a small market capitalization. But the use of variable operating profit and investment can provide a strong explanation of the optimism and pessimism of investors, especially in banks with a large market capitalization

Paper Citation

in Harvard Style

Fauzie S. and Siagian R. (2018). Fama-French Five-Factor Model Analysis on Valuation of Bank Stock Returns.In Proceedings of the 2nd International Research Conference on Economics and Business - Volume 1: IRCEB, ISBN 978-989-758-428-2, pages 276-284. DOI: 10.5220/0008786802760284

in Bibtex Style

@conference{irceb18,
author={Syarief Fauzie and Ranika Elizabeth Siagian},
title={Fama-French Five-Factor Model Analysis on Valuation of Bank Stock Returns},
booktitle={Proceedings of the 2nd International Research Conference on Economics and Business - Volume 1: IRCEB,},
year={2018},
pages={276-284},
publisher={SciTePress},
organization={INSTICC},
doi={10.5220/0008786802760284},
isbn={978-989-758-428-2},
}

in EndNote Style

TY - CONF

JO - Proceedings of the 2nd International Research Conference on Economics and Business - Volume 1: IRCEB,
TI - Fama-French Five-Factor Model Analysis on Valuation of Bank Stock Returns
SN - 978-989-758-428-2
AU - Fauzie S.
AU - Siagian R.
PY - 2018
SP - 276
EP - 284
DO - 10.5220/0008786802760284