Proceedings of The First International Conference on Global Innovation and Trends in Economy, InCoGITE, 7 November 2019, Tangerang, Banten, Indonesia

Research Article

Beta Anomaly, Mispricing, and Idiosyncratic Volatility in Indonesia

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  • @INPROCEEDINGS{10.4108/eai.7-11-2019.2295231,
        author={Feliciana  Florencia and Sung Suk  Kim},
        title={Beta Anomaly, Mispricing, and Idiosyncratic Volatility in Indonesia},
        proceedings={Proceedings of The First International Conference on Global Innovation and Trends in Economy,  InCoGITE, 7 November 2019, Tangerang, Banten, Indonesia},
        publisher={EAI},
        proceedings_a={INCOGITE},
        year={2020},
        month={5},
        keywords={beta anomaly mispricing idiosyncratic volatility},
        doi={10.4108/eai.7-11-2019.2295231}
    }
    
  • Feliciana Florencia
    Sung Suk Kim
    Year: 2020
    Beta Anomaly, Mispricing, and Idiosyncratic Volatility in Indonesia
    INCOGITE
    EAI
    DOI: 10.4108/eai.7-11-2019.2295231
Feliciana Florencia1,*, Sung Suk Kim1
  • 1: Universitas Pelita Harapan
*Contact email: felicianaflo@gmail.com

Abstract

The purpose of this research is to find the evidence of beta anomaly in Indonesia, a stock return anomaly which happens when the high-beta stocks generate lower alpha than the low-beta stocks, and provide an explanation behind it, during the year 2007-2016. This research use double-sorted portfolio formations to find the presence of beta anomaly, the relationship between stocks’ mispricing level and beta, the relationship between stocks’ beta and beta anomaly, and the relationship between idiosyncratic volatility (IVOL) and beta anomaly. The findings show the presence of beta anomaly and is caused by IVOL rather than beta, proved by the alpha and IVOL negative relationship across almost all beta quintiles and the disappearance of the anomaly when one controls for IVOL. This anomaly is present in IDX during the period and is significant only at overpriced stocks.