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The Performance Of Asset Pricing Models Before, During, And After Financial Crisis In Emerging Market: Evidence From Indonesia

Author

Listed:
  • Erie Febrian

    (Finance & Risk Management Study Group (FRMSG) FE UNPAD)

  • Aldrin Herwany

    (Research Division, Laboratory of Management FE UNPAD)

Abstract

Due to dynamic challenge in stock market risk and return measurement, financial practitioners and academics are quite concerned with the development of asset pricing studies. Moreover, validity of the existing theories in the recent Asian financial difficult years stimulates another challenge to the discipline. This paper attempts to investigate the ability of CAPM and APT in explaining excess returns of portfolio of stocks traded in Jakarta Stock Exchange (JKSE). The study assesses validation of the theories using data from 3 different periods of the associated economic circumstances, i.e. pre-crisis period (1992-1997), crisis period (1997-2001), and post-crisis period (2001-2007). Our finding shows that Beta is not the single factor that can explain the portfolio excess returns. At the same time, APT is proven able to vindicate the portfolio excess returns in the observation periods, in which the excess return averages are found to be consistently negative. We also find that spread between the central bank rate and commercial bank rate is constantly significant variable, while risk-premiums vary over the observation periods.

Suggested Citation

  • Erie Febrian & Aldrin Herwany, 2009. "The Performance Of Asset Pricing Models Before, During, And After Financial Crisis In Emerging Market: Evidence From Indonesia," Working Papers in Business, Management and Finance 200902, Department of Management and Business, Padjadjaran University, revised Feb 2009.
    • Handle: RePEc:unp:wpaman:200902
    as

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    File URL: http://lp3e.fe.unpad.ac.id/wpaman/200902.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    CAPM; APT; financial crisis;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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