Alternative solution to achieve abnormal returns on the Indonesian Stock Exchange
Abstract:
Purpose: Investors continuously achieve abnormal returns (ARs) by adopting advanced strategies. Therefore, this study aimed to compare the performance of the IDX Value30 and IDX Growth30 indices, which represent value and growth investment strategies in Indonesia.
Method: The comparison in this study was conducted using return- and risk-adjusted variables represented by Information Ratios and Jensen’s alpha. Based on this approach, Mann-Whitney and independent sample t-tests were performed using the SPSS program.
Results: Both the IDX Value30 and IDX Growth30 indices show positive abnormal returns. However, a comparison of returns, Information Ratios, and Jensen's alpha showed no significant differences between the IDX Value30 and IDX Growth30.
Limitations: The secondary data of IDX Value30 and IDX Growth30 indices were limited to the period from January 30, 2014, to September 30, 2022.
Contribution: IDX Value30 and IDX Growth30 could serve as references for investors and Investment Managers in executing value- and growth-investing strategies to outperform IHSG. Furthermore, Investment Managers could use these indices as benchmarks for issuing index funds or ETFs.
Novelty: This study uniquely compares the performance of value and growth investing using the IDX Value30 and IDX Growth30 indices, a comparison that has not been previously conducted.
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Ahmed, I., & Khan, N. (2019). Who is a sharp manager? First comprehensive sectorial analysis of Pakistan’s mutual fund industry. International Journal of Multidisciplinary and Current Research, 7, 25-29.
Akinde, M. A., Peter, E., & Ikpefan, O. A. (2019). Growth versus value investing: A case of the Nigerian Stock Market. Investment management and financial innovation (16, Iss. 1), 30-45.
Alfonso Perez, G. G. (2017). Value Investing in Thailand’s Stock Market International Journal of Financial Studies, 5(4), 30.
Alfonso Perez, G. G. (2018). Value Investing and Size Effects in the South Korean Stock Market. International Journal of Financial Studies, 6(1), 31.
Arnott, R. D., Harvey, C. R. Kalesnik, V. Linnainmaa, J. T. (2021). Reports of value deaths may have been exaggerated. Financial Analysts Journal, 77(1), 44-67.
Blitz, D., & Hanauer, M. X. (2020). Resurrects the Value Premium. Available at: SSRN 3705218.
Bodie, Z., Kane, A., and Marcus, A.J. (2021). Investments: McGraw-Hill.
Brown, S., Rhee, S. G., and Zhang, L. (2008). Return-to-value in Asian stock markets. Emerging Markets Review, 9(3), 194-205.
Cadamuro, L., & Iwaisako, T. (2023). Value Premium in Japanese Market: Statistical (Re) appraisa. Retrieved from
Damodaran, A. (2012). Growth investment: Betting in the future? Available at: SSRN 2118966.
DiCiurcio, K., Lepigina, O., Kresnak, I., & Davis, J. (2021). Value versus growth stocks: Reversal of fortunes.
Doukas, J. A. Kim, C. Pantzalis, and C. (2004). Divergent opinions and performance of value stocks. Financial Analysts Journal, 60(6), 55-64.
Drew, M. E. and Veeraraghavan, M. (2001). On the Value Premium in Malaysia: Queensland University of Technology, School of Economics and Finance.
Fama, E. F., & French, K. R. (1998). Value versus growth: international evidence. The Journal of Finance, 53(6), 1975-1999.
Gunawan, K. H., Sujana, I. K., & Suputra, I. D. (2017). Perbedaan Return-Sesuaian Risiko antara Value Stock dan Growth Stock di Bursa Efek Indonesia. E-Jurnal Ekonomi dan Bisnis Universitas Udayana, 6(3).
Hasan, N., Pelleng, F. A., Mangindaan, J. V. (2019). Analisis capital asset pricing model (CAPM) sebagai dasar pengambilan keputusan berinvestasi saham (Studi pada Indeks Bisnis-27 di Bursa Efek Indonesia). Jurnal Administrasi Bisnis (JAB), 8(1), 36-43.
Hasnawati, S. (2010). Value and Glamor Stocks Performance at the Indonesia Stock Exchange Using the Price Earning Ratio Approach. The International Business & Economics Research Journal, 9(7), 43.
Indrayono, Y. (2021). What factors affect stocks’ abnormal returns during the COVID-19 pandemic? Data from the Indonesia Stock Exchange: Data from the Indonesia Stock Exchange. European Journal of Business and Management Research, 6(6), 1-11.
Israel, R., Laursen, K., & Richardson, S. A. (2020). Is (systematic) value-investing dead? Journal of Portfolio Management, Forthcoming.
Israelsen, C. (2005). Refinement of Sharpe ratio and information ratio. Journal of asset management, 5, 423-427.
Kakebeeke, J. (2020). The underperformance of value versus growth stocks is explained. Retrieved from https://cfasociety.nl/nl/publicaties/the-underperformance-of-value-vs-growth-stocks-explained/4a37e54d-5361-11eb-8a1e-005056b303d3
Khoa, B. T., & Huynh, T. T. (2021). Is it possible to earn abnormal returns in an inefficient market? An Approach Based on Machine Learning for Stock Trading. Computational Intelligence and Neuroscience 2021.
Khoa, B. T., & Huynh, T. T. (2023). Value premium and uncertainty: An approach that uses a support vector regression algorithm. Cogent Economics & Finance, 11(1), 2191459.
Khurram, M. U., Hamid, K., Javeed, S. A. (2020). Association of Mutual Fund Risk Measures and Return Parameters: A Juxtapose of Ranking for Performance in Pakistan. The Journal of Asian Finance, Economics and Business (JAFEB), 8(2), 25-39.
Lam, K. S., Dong, L., & Yu, B. (2019). Value premium and technical analysis: Evidence from the Chinese stock market. Economies, 7(3), 92.
Larasati, D., Kelen, L. H. S. (2021). Apakah Pembatasan Sosial Berskala Besar (PSBB) Berdampak Terhadap Average Abnormal Return?(Studi Pada Pasar Modal Indonesia). Jurnal Ilmu Manajemen Dan Bisnis, 12(1), 1-8.
Lev, B., & Srivastava, A. (2019). Explaining the recent failure of value investing. NYU Stern School of Business.
Maloney, T., & Moskowitz, T. J. (2020). Value and Interest Rates: Are Rates to Blame for Value’s Torments? Available at SSRN 3608155.
Miller, M., & Prondzinski, D. (2020). Value Style Investing Versus Growth Style Investing: Evidence from the 2002-2019 Business Cycle. Journal of Accounting and Finance, 20(1).
Nugroho, G. D. (2017). RISK AND RETURN EVALUATION OF GLAMOR AND VALUE STOCK PERFORMANCE ON INDONESIAN CAPITAL MARKET.
Penman, S., & Reggiani, F. (2018). Fundamentals of value versus growth investing and an explanation for the value trap. Financial Analysts Journal, 74(4), 103-119.
Perez, G. (2018). Value and size effects in the stock market of the Philippines. International journal of financial research, 9(2), 191-202.
Pettengill, G., Chang, G., & Hueng, C. J. (2014). Choosing between value and growth in mutual fund investing. Financial Services Review, 23(4), 341-359.
Rabbani, M. F., & Muharam, H. (2016). Analisis Value Stock Dan Growth Stock Di Bursa Efek Indonesia Setelah Krisis Global 2008 Studi Kasus Pada Perusahaan Di Bursa Efek Indonesia Periode 2002-2015. Fakultas Ekonomika dan Bisnis.
Reilly, F. K., Brown, K. C., & Leeds, S. J. (2019). Investment analysis & portfolio management: Cengage Learning, Inc.
Robiyanto, R. (2017). The volatility-variability hypotheses testing and hedging effectiveness of precious metals for the Indonesian and Malaysian capital market. Gadjah Mada International Journal of Business, 19(2), 167-192.
Schießl, C. (2014). Value Stocks beat growth stocks: An empirical analysis for the German stock market: Anchor Academic Publishing (aap_verlag).
Sharma, M., & Jain, A. (2020). Role of size and risk effects in value anomaly: Evidence from the Indian stock market. Cogent Economics & Finance, 8(1), 1838694.
Shradhanjali, P. D., & Ananya, M. (2018). Value Vs growth stocks: evidence from Indian stock market.
Treynor, J. L., & Black, F. (1973). How to use security analysis to improve portfolio selection. The journal of business, 46(1), 66-86.
Venugopal, M., & Sophia, S. (2020). Examining Sharpe ratio, ASR, Sortino, Treynor and Info ratio in Indian equity mutual funds during the pandemic. Malathy Venugopal and Sharon Sophia, Examining Sharpe Ratio, ASR, Sortino, Treynor and Info Ratio in Indian Equity Mutual Funds during the Pandemic, International Journal of Management, 11(11).
Weng, J., & Butler, I. (2022). Value vs. Growth investing: Value returns with a vengeance: JP Morgan Asset Management. https://am. jpmorgan. com/fi/en/assetmanagement ….
Willim, A. P. (2019). Analisis Komparatif Tingkat Pengembalian Value Stocks dan Growth Stocks di Bursa Efek Indonesia. Jurnal Pasar Modal dan Bisnis, 1(1), 13-22.
Yen, J. Y., Sun, Q., & Yan, Y. (2004). Value versus growth stocks in Singapore. Journal of Multinational Financial Management, 14(1), 19-34.
- Ahmed, I., & Khan, N. (2019). Who is a sharp manager? First comprehensive sectorial analysis of Pakistan’s mutual fund industry. International Journal of Multidisciplinary and Current Research, 7, 25-29.
- Akinde, M. A., Peter, E., & Ikpefan, O. A. (2019). Growth versus value investing: A case of the Nigerian Stock Market. Investment management and financial innovation (16, Iss. 1), 30-45.
- Alfonso Perez, G. G. (2017). Value Investing in Thailand’s Stock Market International Journal of Financial Studies, 5(4), 30.
- Alfonso Perez, G. G. (2018). Value Investing and Size Effects in the South Korean Stock Market. International Journal of Financial Studies, 6(1), 31.
- Arnott, R. D., Harvey, C. R. Kalesnik, V. Linnainmaa, J. T. (2021). Reports of value deaths may have been exaggerated. Financial Analysts Journal, 77(1), 44-67.
- Blitz, D., & Hanauer, M. X. (2020). Resurrects the Value Premium. Available at: SSRN 3705218.
- Bodie, Z., Kane, A., and Marcus, A.J. (2021). Investments: McGraw-Hill.
- Brown, S., Rhee, S. G., and Zhang, L. (2008). Return-to-value in Asian stock markets. Emerging Markets Review, 9(3), 194-205.
- Cadamuro, L., & Iwaisako, T. (2023). Value Premium in Japanese Market: Statistical (Re) appraisa. Retrieved from
- Damodaran, A. (2012). Growth investment: Betting in the future? Available at: SSRN 2118966.
- DiCiurcio, K., Lepigina, O., Kresnak, I., & Davis, J. (2021). Value versus growth stocks: Reversal of fortunes.
- Doukas, J. A. Kim, C. Pantzalis, and C. (2004). Divergent opinions and performance of value stocks. Financial Analysts Journal, 60(6), 55-64.
- Drew, M. E. and Veeraraghavan, M. (2001). On the Value Premium in Malaysia: Queensland University of Technology, School of Economics and Finance.
- Fama, E. F., & French, K. R. (1998). Value versus growth: international evidence. The Journal of Finance, 53(6), 1975-1999.
- Gunawan, K. H., Sujana, I. K., & Suputra, I. D. (2017). Perbedaan Return-Sesuaian Risiko antara Value Stock dan Growth Stock di Bursa Efek Indonesia. E-Jurnal Ekonomi dan Bisnis Universitas Udayana, 6(3).
- Hasan, N., Pelleng, F. A., Mangindaan, J. V. (2019). Analisis capital asset pricing model (CAPM) sebagai dasar pengambilan keputusan berinvestasi saham (Studi pada Indeks Bisnis-27 di Bursa Efek Indonesia). Jurnal Administrasi Bisnis (JAB), 8(1), 36-43.
- Hasnawati, S. (2010). Value and Glamor Stocks Performance at the Indonesia Stock Exchange Using the Price Earning Ratio Approach. The International Business & Economics Research Journal, 9(7), 43.
- Indrayono, Y. (2021). What factors affect stocks’ abnormal returns during the COVID-19 pandemic? Data from the Indonesia Stock Exchange: Data from the Indonesia Stock Exchange. European Journal of Business and Management Research, 6(6), 1-11.
- Israel, R., Laursen, K., & Richardson, S. A. (2020). Is (systematic) value-investing dead? Journal of Portfolio Management, Forthcoming.
- Israelsen, C. (2005). Refinement of Sharpe ratio and information ratio. Journal of asset management, 5, 423-427.
- Kakebeeke, J. (2020). The underperformance of value versus growth stocks is explained. Retrieved from https://cfasociety.nl/nl/publicaties/the-underperformance-of-value-vs-growth-stocks-explained/4a37e54d-5361-11eb-8a1e-005056b303d3
- Khoa, B. T., & Huynh, T. T. (2021). Is it possible to earn abnormal returns in an inefficient market? An Approach Based on Machine Learning for Stock Trading. Computational Intelligence and Neuroscience 2021.
- Khoa, B. T., & Huynh, T. T. (2023). Value premium and uncertainty: An approach that uses a support vector regression algorithm. Cogent Economics & Finance, 11(1), 2191459.
- Khurram, M. U., Hamid, K., Javeed, S. A. (2020). Association of Mutual Fund Risk Measures and Return Parameters: A Juxtapose of Ranking for Performance in Pakistan. The Journal of Asian Finance, Economics and Business (JAFEB), 8(2), 25-39.
- Lam, K. S., Dong, L., & Yu, B. (2019). Value premium and technical analysis: Evidence from the Chinese stock market. Economies, 7(3), 92.
- Larasati, D., Kelen, L. H. S. (2021). Apakah Pembatasan Sosial Berskala Besar (PSBB) Berdampak Terhadap Average Abnormal Return?(Studi Pada Pasar Modal Indonesia). Jurnal Ilmu Manajemen Dan Bisnis, 12(1), 1-8.
- Lev, B., & Srivastava, A. (2019). Explaining the recent failure of value investing. NYU Stern School of Business.
- Maloney, T., & Moskowitz, T. J. (2020). Value and Interest Rates: Are Rates to Blame for Value’s Torments? Available at SSRN 3608155.
- Miller, M., & Prondzinski, D. (2020). Value Style Investing Versus Growth Style Investing: Evidence from the 2002-2019 Business Cycle. Journal of Accounting and Finance, 20(1).
- Nugroho, G. D. (2017). RISK AND RETURN EVALUATION OF GLAMOR AND VALUE STOCK PERFORMANCE ON INDONESIAN CAPITAL MARKET.
- Penman, S., & Reggiani, F. (2018). Fundamentals of value versus growth investing and an explanation for the value trap. Financial Analysts Journal, 74(4), 103-119.
- Perez, G. (2018). Value and size effects in the stock market of the Philippines. International journal of financial research, 9(2), 191-202.
- Pettengill, G., Chang, G., & Hueng, C. J. (2014). Choosing between value and growth in mutual fund investing. Financial Services Review, 23(4), 341-359.
- Rabbani, M. F., & Muharam, H. (2016). Analisis Value Stock Dan Growth Stock Di Bursa Efek Indonesia Setelah Krisis Global 2008 Studi Kasus Pada Perusahaan Di Bursa Efek Indonesia Periode 2002-2015. Fakultas Ekonomika dan Bisnis.
- Reilly, F. K., Brown, K. C., & Leeds, S. J. (2019). Investment analysis & portfolio management: Cengage Learning, Inc.
- Robiyanto, R. (2017). The volatility-variability hypotheses testing and hedging effectiveness of precious metals for the Indonesian and Malaysian capital market. Gadjah Mada International Journal of Business, 19(2), 167-192.
- Schießl, C. (2014). Value Stocks beat growth stocks: An empirical analysis for the German stock market: Anchor Academic Publishing (aap_verlag).
- Sharma, M., & Jain, A. (2020). Role of size and risk effects in value anomaly: Evidence from the Indian stock market. Cogent Economics & Finance, 8(1), 1838694.
- Shradhanjali, P. D., & Ananya, M. (2018). Value Vs growth stocks: evidence from Indian stock market.
- Treynor, J. L., & Black, F. (1973). How to use security analysis to improve portfolio selection. The journal of business, 46(1), 66-86.
- Venugopal, M., & Sophia, S. (2020). Examining Sharpe ratio, ASR, Sortino, Treynor and Info ratio in Indian equity mutual funds during the pandemic. Malathy Venugopal and Sharon Sophia, Examining Sharpe Ratio, ASR, Sortino, Treynor and Info Ratio in Indian Equity Mutual Funds during the Pandemic, International Journal of Management, 11(11).
- Weng, J., & Butler, I. (2022). Value vs. Growth investing: Value returns with a vengeance: JP Morgan Asset Management. https://am. jpmorgan. com/fi/en/assetmanagement ….
- Willim, A. P. (2019). Analisis Komparatif Tingkat Pengembalian Value Stocks dan Growth Stocks di Bursa Efek Indonesia. Jurnal Pasar Modal dan Bisnis, 1(1), 13-22.
- Yen, J. Y., Sun, Q., & Yan, Y. (2004). Value versus growth stocks in Singapore. Journal of Multinational Financial Management, 14(1), 19-34.