RATIONALITY FOR CONSISTENT RETURN IN IHSG INVESTING

• Main Author: Chandra, Herry
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/56006
• Institution: Institut Teknologi Bandung

The stock market provided one of the highest return among all investment classes like properties, government bond, investment grade cooperate bonds and bank deposit. In past decade, the IHSG provided Compound Annual Growth Rate return of 7.2% and the LQ45 index provide return of 4.5%. However, some investor believe that one can achieve higher return by performing individual stock picking and not investing in the ETF that track the index market. Some investor buying the stock based on the fundamental value about the company like Price Book Value, Price Earning Ratio, Return on Equality and market cap. This study aiming to check if there are ratio that can consistently provide higher return than the index and what financial ratio that provided the highest stock return in the period of 2008 to 2019. This study is performed by the obtaining all information listed stock, market cap, pricing data, financial ratio and dividend of the stock. Further, some assumption and limitation of the study is outlined in this study to avoid biased in the study. Following that, market cap of all listed stock were divided into 3 market categories, which consist of all stock, where all the listed stock is considered in the study, large cap, where only top 20% of the largest stock is considered, and last small cap, where only 20% of smallest listed company is consider. Then, the stock is tabulated based on its financial ratio, where consist of , Top 20 highest and lowest PB, PER stock in each of its market categories. The return (or lost) of each stock in listed categorize is estimated. Finally after all the data is obtained, all of the return obtained is tabulated and compared to each other ratio and index return. All in all, consistently investing the lowest PBV and PER stock seem to provided the highest return among other financial ratio especially all market cap or only small market cap. The return for the investor to return on the big cap stock appear to provide much lower return than other two market cap category. Another important take away is that in high PER, high PBV and high ROE stock, which measure the quality of the company do not provided high return on one portfolio, meaning that the purchasing the high quality company does not translate to the good investment, but consistently purchase value company with the low PER and PBV likely provide a higher return.