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
- 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/).
Cite this article
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 -