Does The 6-Factor Model Work Better in The Indonesian Capital Market

DOI

10.2991/978-94-6463-443-3_24How to use a DOI?

Keywords

Excess Return; Market Risk Premium

Abstract

Researchers have made various efforts to discover the best relationship between systematic risk and portfolio returns, and one of these efforts is the Fama and French model. This research aimed to examine whether the latest version, the Fama and French 6-factor model, can outperform the previous version, the Fama and French 5-factor model, using the Kompas 100 Index as a proxy. The method used is a two-stage multiple regression with portfolio formation based on SMB, HML, RMW, CMA, and UMD criteria. The research results indicate that the Fama and French 6-factor model has not yet been able to outperform the Fama and French 5-factor model with the 2x3 portfolio construction. However, it can outperform the Fama and French 5-factor model with the 2x2 portfolio construction because adding one risk factor reduces the variation in risk concerning the variation in portfolio returns formed.

Copyright

© 2024 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Dwi Darma
AU  - Ikaputera Waspada
AU  - Maya Sari
PY  - 2024
DA  - 2024/06/26
TI  - Does The 6-Factor Model Work Better in The Indonesian Capital Market
BT  - Proceedings of the 8th Global Conference on Business, Management, and Entrepreneurship (GCBME 2023)
PB  - Atlantis Press
SP  - 162
EP  - 172
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-443-3_24
DO  - 10.2991/978-94-6463-443-3_24
ID  - Darma2024
ER  -