Analysis of Asset Growth Anomaly on Cross-Section Stock Returns: Evidence from Indonesia Stock Exchanges  

Oleh:

Iqbal, Muhammad ; Wibowo, Buddi

Jenis: Article from Journal - ilmiah nasional - terakreditasi DIKTI
Dalam koleksi: Journal of Economics, Business, & Accountancy: ventura vol. 19 no. 3 (2017), page 335 – 348.
Topik: Asset Growth Anomaly; Returns Predictability; Efficient Market; and Two Stage-Cross-Section Regression
Fulltext: 515-2492-1-PB_Ros.pdf (310.85KB)

Isi artikel

This study aims to examine asset growth anomaly where stocks with high asset growth will be followed by low returns in the subsequent periods. This study, using Indonesia Stock Exchanges data, found that an equally weighted low-growth portfolio outperforms high-growth portfolio by average 0.75% per month (9% per annum), confirming existence of asset growth anomaly. The analysis was extended at individual stocklevel using fixed-effect panel regression in which asset growth effect remains significant even with controlling other variables of stock return determinants. This study also explores further, whether asset growth can be included as risk factor. Employing two-stage cross-section regression in Fama and Macbeth (1973), the result aligns with some the previous studies that asset growth is not a new risk factor; instead, the anomaly is driven by mispricing due to investors’ overreaction and psychological bias. This result imply that asset growth anomaly is general phenomenon that can be found at mostly all stock market but in Indonesia market asset growth anomaly rise from investors’ overreaction, instead of playing as a factor of risk.

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