DEFINING MARKET BIAS BY USING GROWTH AND VALUE STOCK UNDER PRICE MOMENTUM

• Main Author: Shizuka (NIM 19014122), Thalia
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/24513
• Institution: Institut Teknologi Bandung

The objective of this research is to know what behavioral biases might occur on growth and value stocks traders regarding its price momentum in Indonesia Stock Market. By knowing the market behavioral biases, investors can practically learn how market trading <br /> <br /> decisions are made especially for growth and value stocks. Therefore this research could help investor’s portfolio management. Theoretically this research can help to increase the knowledge over investment and behavioral finance in Indonesia.Rather than using investor’s type, price momentum is used to define investors’ bias that occurred in stock with different characteristics. In this research, the stocks characteristics are defined as growth and value stocks. To define which stocks categorized as growth <br /> <br /> and value stocks, Price-to-book ratio of each company in Indonesia Stock Exchange is ranked from the biggest tot eh smallest. Ranked companies are divide into five quintiles.The top quintile as growth stocks and the bottom quintile as value stocks (Capaul, 1993). <br /> <br /> Next, first step time series regression is conducted by using market stock (IHSG) volume turnover as the independent variable and company stock volume turnover as the dependent variable. The aim for the first regression is to delete the effect of market turnover rate to company turnover rate. The residual value of first regression will become second panel data regression’s dependent variables. Here the moment of company stocks price hitting the highest and the lowest point are the independent variables that used (Kaustia, 2004). Market bias could be seen through price momentum effect on company stock volume turnover change.