| This study aims to test the ability to explain the variability of excess returns portfolio between the Three Factor Model and Capital Asset Pricing Model in Indonesia Stock Exchange. The study also tested the ability of two additional variables from the Three Factor Model with a market factor (beta). To test the models in explaining the variability of the portfolio excess return is done by comparing the value of the adjusted coefficient of determination (adjusted R2) Three Factor Model and the CAPM using mean test. Once the test has done the comparison value of the adjusted coefficient of determination (adjusted R2) between the Two Factor Model CAPM (SML and HMB) using mean test. The study concludes that the Three Factor Model and the CAPM is equal in explaining the excess return on a portfolio of all portfolios. Two additional variables from the Three Factor Model of SMB and HML do not have a significance contribution to The Three Factor Model in order to explain excess return portfolio. |