File(s) under permanent embargo

Is Indonesia's stock market different when it comes to predictability?

journal contribution
posted on 01.09.2019, 00:00 authored by Susan SharmaSusan Sharma, Paresh Narayan, Kannan ThuraisamyKannan Thuraisamy, N Laila
We construct a unique dataset consisting of 342 firms aimed at stock return predictability. Using seven predictors, we show that unlike in conventional markets, it is capital expenditure that is the most successful predictor of returns. However, the overall evidence of out-of-sample predictability when using other conventional return predictors is weak. Capital expenditure-based forecasting models do lead to profits also although these are small. This tends to imply that for markets that are at the nascent stages of development, such as Indonesia, capital expenditure might have a role to play in shaping the market. Our results are in sharp contrast to the literature on emerging markets.

History

Journal

Emerging markets review

Volume

40

Article number

100623

Pagination

1 - 11

Publisher

Elsevier

Location

Amsterdam, The Netherlands

ISSN

1566-0141

eISSN

1873-6173

Language

eng

Publication classification

C1 Refereed article in a scholarly journal

Copyright notice

2019, Elsevier B.V.