Macroeconomic Determinants of Sectoral Stock’s Return in Indonesia

during the Period of January 2007 – December 2011

(Case Study : Arbitrage Pricing Theory with Sectoral Approachment)

ABSTRACT

In making an investment decision, Investor would expect getting a return as gain on

capital or dividens. But in every investment, there must be some risk in it. This risk

arises from the absence of a certainty that a security will get a return or divident

continuously, while in fact, It can also suffer losses. In order to determine the most

profitable investment alternatives, there are some models that can be used to predict

the risk and return of a stock. One of them is a model of Arbitration Pricing Theory

(APT). APT models accommodate a more varied sources of risk, namely the systematic

risk such as country's macroeconomic conditions.

This study aims to determine the macroeconomic variables that affect the return the

Indonesia Stock Exchange from January 2007 - December 2011 and the sensitivity of a

portfolio of nine industries in Indonesia on macroeconomic variables (inflation (INF),

the price of gold (ED), money supply (M2), and exchange rate (rATE)) that occurred in

the determined period. The sample in this study are stocks traded during the period of

observation and classified into 38 portfolios. Establishment of a portfolio based on the

ratings of beta, beta ranked from the largest to the smallest, similar to the methodology

used by Fama and Mac Beth (Sudarsono, 2002). While the sample used in testing the

sensitivity of the industry portfolio is actively traded stock during the observation

period and classified based on industry sector.

The research method is verification method. Data were analyzed using time series data

with two pass regression analysis according to the theory of APT (Arbitrage Pricing

Theory) and hypothesis testing using the F test and t test. The test results

simultaneously using F test with a significance level (α) of 5% indicates macroeconomic

variables (inflation (INF), the price of gold (ED), and the exchange rate (RATE)) gold

show that they have negative effect on stock returns but do not have a significant affect.

While variable in the money supply (M2) negatively significant effect on stock returns.

The test results also show that each sector does not have different sensitivity to change

macroeconomic variables because macroeconomic variables is a common factor that

gives the same effect statistically.