A Model for Stock Return Predictability in Indonesia

Assagaf, Aminullah and Sayidah, Nur (2020) A Model for Stock Return Predictability in Indonesia. International Journal of Innovation, Creativity, and Change., 13 (7). pp. 507-523. ISSN 2201-1323

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Abstract

This study aims to develop a stock return model in Indonesia. Variables consist of stock return as the dependent variable, profitability, earnings management, and liquidity as the independent variable, leverage as the moderating variable and company size as the control variable. Researchers selected 20 of the most active shares in the volume of trading transactions between 2015-2018 and obtained 60 observations. The selection of this nonlinear regression model is based on the justification for the large coefficient of determination. The results of the data analysis show that liquidity has a significant effect on stock returns. Other independent variables, earnings management profitability, and leverage do not significantly affect stock returns. This finding shows that changes in critical variables have not been responded to by investors or supported by relatively small numbers of determining coefficients. This research makes a contribution to incorporating decision-makers to improve their performance creatively to increase stock returns.

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