Single Beta and Dual Beta Models: A Testing of CAPM on Condition of Market Overreactions
Journal Title: GATR Journal of Finance and Banking Review - Year 2017, Vol 2, Issue 3
Abstract
Objective – A previous study conducted by the same authors found that the conditions of market overreaction occurred in Indonesia and the market factor in CAPM, or a single beta, is able to explain the portfolio returns. As a continuation of that study, we now use the concept of conditional CAPM, or a dual beta, to test whether the performance of the dual beta can outperform the single beta. Methodology/Technique – The research uses the stocks of non-financial sector company on the Indonesian Stock Exchange during the period between July 2005 and December 2015, which have been divided into two portfolios; the winner and the loser. The conditional CAPM is applied by separating the market into upstream markets and downstream markets, so the dual beta model can be formulated. Findings – The results are consistent with the findings of Pettengill et al. (1995). The results of a single beta test do not comply with the conditions required in the CAPM model and this can be corrected through conditional beta testing that includes the testing on the up beta, down beta, and the dual beta. Novelty – The dual beta model can explain the returns of the portfolio in accordance with the expected results in CAPM testing. The explanation by using the dual beta model is more accurate and more successful than the single beta model. Type of Paper: Empirical.
Authors and Affiliations
Ferikawita M. Sembiring, Sulaeman Rahman, Nury Effendi, Rachmat Sudarsono
Keywords
Related Articles
- EP ID EP201625
- DOI -
- Views 158
- Downloads 0
Factors Affecting Earnings Management in the Indonesian Stock Exchange
Objective – The purpose of this research is to analyze the effect of growth, leverage, fixed asset turnover, profitability, firm size, firm age, industry, audit quality, and auditor independence toward earnings managemen...
Corporate Social Responsibility as a Means of Performance Enhancement: The Case of a Cement Plant in Setif (Algeria)
Objective - The main concern of this article is to see if the implementation of the Corporate Social Responsibility (CSR) can lead to enterprise performance. Methodology/Technique - A case study, this paper aims to comp...
The Influence of Global Stock Index and the Economic Indicators of Stock Investment Decision by Foreign Investors in the Indonesian Stock Exchange
Objective - The objective of this study is to determine how the movement of several indices and indicators of the global economy affect the change in investment by foreign fund flows in the Indonesia Stock Exchange (BEI)...
Development and Shari'ah issues of the Takaful industry in Malaysia – Effects of the Regulatory Framework on the Implementation and Growth
Objective - This paper aims to discuss and analyse whether the participation of long established conventional insurance conglomerates will be positive towards the development of the Takaful, particularly in the aspect of...
Black Gold Has Fallen - No More Gambling on the Prices
Objective - The crude oil, also known as black gold, is an essential commodity for the sustainability of various industries in the world. Oil prices play an important role in world economy because it causes repercussions...