Proceedings of the International Conference on Business and Engineering Management (ICONBEM 2021)

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Retained Earnings Factor Analysis on Return and Excess Return: A Comparison Study of Retained Earnings-to-Market Equity and Book-to-Market Equity from 2008 - 2018

Authors
Muhammad Fahreza, Eko Rizkianto
Corresponding Author
Eko Rizkianto
Available Online 25 May 2021.
DOI
10.2991/aebmr.k.210522.030How to use a DOI?
Keywords
Retained Earnings, Book-to-Market, Fama-MacBeth Regression, Single Index Model
Abstract

The most recent study regarding book-to-market was by Ball (Ball et al., 2020) which based on stocks in the United States. They found that retained earnings gives book-to-market predictive power in explaining and predicting expected return. Then, can the book-to-market phenomenon in Indonesia be explained through the retained earnings factor? This study tries to explain and compare factors between retained earnings and book value of equity in Indonesia. This study uses the Fama-MacBeth regression method and portfolio test using Single Index Model in explaining returns and excess returns to book-to-market and retained earnings-to-market. The results show that the retained earnings-to-market factor can explain average cross section of returns. The portfolio test shows that the retained earnings-to-market factor had a higher excess return and alpha than book-to-market for equally weighted portfolio. Recommendation for future research are testing the retained earnings factor to predict return as individual stocks rather as portfolio.

Copyright
© 2021, the Authors. Published by Atlantis Press.
Open Access
This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

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Volume Title
Proceedings of the International Conference on Business and Engineering Management (ICONBEM 2021)
Series
Advances in Economics, Business and Management Research
Publication Date
25 May 2021
ISBN
10.2991/aebmr.k.210522.030
ISSN
2352-5428
DOI
10.2991/aebmr.k.210522.030How to use a DOI?
Copyright
© 2021, the Authors. Published by Atlantis Press.
Open Access
This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).

Cite this article

risenwbib
TY  - CONF
AU  - Muhammad Fahreza
AU  - Eko Rizkianto
PY  - 2021
DA  - 2021/05/25
TI  - Retained Earnings Factor Analysis on Return and Excess Return: A Comparison Study of Retained Earnings-to-Market Equity and Book-to-Market Equity from 2008 - 2018
BT  - Proceedings of the International Conference on Business and Engineering Management (ICONBEM 2021)
PB  - Atlantis Press
SP  - 225
EP  - 231
SN  - 2352-5428
UR  - https://doi.org/10.2991/aebmr.k.210522.030
DO  - 10.2991/aebmr.k.210522.030
ID  - Fahreza2021
ER  -