Reversals in Emerging Market-Will Momentum Strategy Be Profitable in Indonesia's Stock Market? (Agista Saraswati) PDF

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Student ID Number: 170379269
Name and Surname: Agista Rully Saraswati
MSc Programme: MSc Behavioural Finance
Title: Reversals in Emerging Market: Will Momentum Strategy Be Profitable in

Indonesia’s Stock Market?
Name of Supervisor: Prof. Theodore Panagiotidis
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Abstract
Indonesia is one of the emerging financial market in the world (Spiro, 2018). The archipelago
country has promising economic growth, supported by the fact that Indonesia has the potential
resource to develop their macroeconomic situation in the future. Despite the strength that belongs to
the country currently under Joko Widodo’s regime, Indonesia has hit the lowest level of its currency,
Rupiah in 31-months. It is reported that Rupiah knocked down against US Dollar and the international
investors had dumped US$3.4 billion of stocks and bonds since the start of April. In fact, 40% of
Indonesia’s government bonds were held by foreign investors. Thus, it is expected that studying
Indonesia’s financial market will encourage the local investors to deposit their funds. When the
financial market is no longer dominated by foreign investors, it is predicted that Rupiah will
strengthen significantly over a period of time.
Particular conditions that happen in the market possibly create an effect to the random walk
theories. When one period returns repeat and creating a pattern, the assumption of independent and
identical distribution will be adjusted. For example, a huge change in price pattern will be followed by
large daily changes in the market as well. The pattern of expected returns then utilized by investors to
predict future gains, thus the violations of the random walk could be explained by behavioural theory.
A momentum strategy is a method that involved categorization between winner and loser stocks or
glamour and value stocks. The behavioural explanations for momentum strategy prove that investors
may become irrational, and it contradicts with Efficient Market Hypothesis.
Using IDX monthly return data from 2004 to 2017 that were collected from Yahoo Finance,
this study is expected to construct past winners and past losers’ group from LQ-45 index. The
parameter to determine a stock as LQ-45 are have been included as the top 60 companies with the
highest market capitalization, included as the top 60 companies with the highest transaction value in
regular market for 12 months, have been listed in Indonesia Stock Exchange for at least 3 months, and
have good financial conditions and prospect of growth. Therefore, the sample was constructed as 15
firms out of 45.
This study appears to show that momentum strategy is ineffective in the Indonesian stock
market. The factors that support this argument are: Indonesia stock market is emerging, so it is
volatile and momentum strategy is hard to investigate. The samples of the study gathered from
reliable index LQ-45 that means the samples are already the winner of Indonesia stock market, and
diversified industries in Indonesian seems cannot be exploited by momentum trader to gain future
return.
Keywords: Momentum Strategy, Behavioural Finance, Efficient Market Hypothesis, LQ-45,

Emerging Market, January Effect.
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Table of Contents
1. Introduction...........................................................................................................3
2. Literature Review ..................................................................................................4
A. Efficient Market Hypothesis ............................................................................4
B. The Implications of Momentum Strategy .........................................................7
3. Empirical Framework and Data .......................................................................... 10
A. Sample ......................................................................................................... 10
B. Procedures .................................................................................................... 11
C. Portfolio Formation ...................................................................................... 12
D. Methodology ................................................................................................ 17
4. Empirical Analysis ............................................................................................. 18
A. The Overall Graph of Past Winner and Past Loser Over the Period ............... 18
B. Main Findings .............................................................................................. 20
5. Discussion .......................................................................................................... 21
6. Conclusion ......................................................................................................... 25
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1. Introduction
Efficient Market Hypothesis assumes that financial market is predictable. According
to Fama (1970), an ideal market is built from a signal that is fully reflected on the price
such that investors are able to choose in which securities they would like to invest,
assuming that most investors are rational enough after receiving an information that is
being distributed in the market. However, there are exceptions when the market price
peaking in particular moments such as the January Effect or Seasonal Effect
(Panagiotidis and Alagidede,2009). This phenomenon is usually called as calendar
anomalies. The anomaly leads the investor to trade their portfolio and it affects the
market. It creates a momentum strategy or reversals.
Indonesia is one of the emerging financial market in the world (Spiro, 2018). The
archipelago country has promising economic growth, supported by the fact that
Indonesia has the potential resource to develop their macroeconomic situation in the
future. Indonesia is currently grouped under CIVETS (Colombia, Indonesia, Vietnam,
Egypt, Turkey, and South Africa) of potential emerging countries (Indonesia Investment,
2016). It was forecasted that Indonesia with the other 5 countries combined GDP (Gross
Domestic Product) will dominate half of the global economy by 2020. This prediction
arose because Indonesia has these following strengths (Indonesia Investment, 2016):
owning various and plentiful natural resources, young and vast population, low labour
costs, and located between the most developed market China and India.
Despite the strength that belongs to the country currently under Joko Widodo’s
regime, Indonesia has hit the lowest level of its currency, Rupiah in 31-months. It is
reported that Rupiah knocked down against US Dollar and the international investors had
dumped US$3.4 billion of stocks and bonds since the start of April (Salna, 2018). In fact,
40% of Indonesia’s government bonds were held by foreign investors (Salna, 2018).
Subsequently, the central bank of Indonesia tried to cover the nosedive of Rupiah by
increasing interest rates for the first time since 2014. Thus, it is expected that studying
Indonesia’s financial market will encourage the local investors to deposit their funds.
When the financial market is no longer dominated by foreign investors, it is predicted
that Rupiah will strengthen significantly over a period of time (Salna, 2018).
There were two suggested hypotheses from the study by De Bondt and Thaler
(1985) study: 1) the extreme price movement in stock prices will be followed by
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subsequent price movements in the opposite direction and 2) the more extreme the initial
price movement, the adjustment will be greater. The hypotheses above contradicts to
Efficient Market Hypothesis, there was a violation in weak form market efficiency.
According to the explanation above: 1) there was a connection between momentum

strategy and January effect anomaly; 2) there was not much evidence of Indonesia’s
stock market performance in international study; 3) studying Indonesia financial market
will stimulate domestic investor to deposit their funds and develop Indonesia’s financial
market. Thus, this paper will examine whether reversals happened in Indonesian stock
market from 2007 to 2017? And will it be profitable to apply the momentum strategy in
Indonesia stock market in the future? What are the implications of the momentum
strategy in Indonesian stock market?
This paper is structured as follows: the next section will explain about the literature
review, followed by methodology and research method used in the study, section 3 will
mainly discuss the results of the empirical study. The last part of the paper represents the
conclusions, brief summary, and implications.
2. Literature Review
A. Efficient Market Hypotheses
The ideal capital market according to Fama (1970) is where the stock price fully
reflects firms’ resources. The form of resources could be the production-investment
decisions by the firm or the decision made by the investors according to the information
that is available in the market and creates the value of stock price itself. Therefore, Fama
(1970) believed that an efficient market the price will be unpredictable since investors
will react accordingly to the information and the stock price will gradually plummeting
or ascending.
Fama (1970) described an efficient market in three categories: the first one is the
weak form where the stock price contains historical information, the historical
information often conducted on firms’ performance in the annual financial report. Semi-
strong form market is described where the price efficiently adjusts to information that is
publicly released. It means that the price reflects the firm’s performance and adapting to
either government regulation or the company’s policy. The last one is strong-form in
which stock price is conducted according to given relevant information by monopolistic
access inside the company (Fama, 1970).
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To investigate the efficient market hypothesis in an empirical study, Fama (1970)
used Sharpe Lintner parameter on equilibrium prices. The assumption of the study
explained that the expected returns are predicted to capture the conditions of market
equilibrium. The equilibrium on expected returns later defined as a function of its ‘risk’
(Fama, 1970).
In addition, Fama argued on Efficient Capital Markets: A Review of Theory and

Empirical Work (1970) that the stock price is a random walk. Fama (1970) believed that
the change of stock price is independent and identically distributed, the argument
suggests that stock price cannot be predicted in the future using historical pattern. It was
assumed that even the investors experience the process of generating new information to
produce equilibrium, they will stay rational since the return of each period is independent
of each other. In the future, the information which was conducted to generate stock price
cannot be utilised to predict expected returns according to the pattern generated in the
market.
However, particular conditions that happen in the market possibly create an effect to
the random walk theories. When one period returns repeat and creating a pattern, the
assumption of independent and identical distribution will be adjusted. For example, a
huge change in price pattern will be followed by large daily changes in the market as
well. Fama (1970) argued that such changes indicate the denial of a random walk model,
not the market efficiency.
Using Fama Three Factors Model, Asness et al. (2012) found a different
phenomenon on momentum strategy application in Europe, U.K, U.S, and Japan stock
market. In the Western countries such as U.K, Europe, and the U.S there was a
significant effect of momentum strategy to the return gain of the market. It means that
momentum strategy can be used to predict future stock price change and become
investor’s shortcut to gain more returns (Asness et al., 2012). However, momentum
strategy was not doing very well in Japan stock market unlike Yuan and Gupta’s (2014)
finding that Chinese Lunar New Year which happens in January created a positive effect
on momentum strategy.
Panagiotidis and Alagidede (2009) found that not all country affected by the
anomalies during the first month of the year, in their study they found that Ghana’s
financial market affected by anomalies in April. The findings are different if compared to
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similar studies that have been conducted formerly. The study is consistent with
Jagadeesh and Titman (1993) findings that the winners of momentum strategy
outperform losers almost in all month except January, the peculiar moment happened
during January when losers outperform winners of momentum strategy.
Similar results also found in Asian countries, the most noticeable anomaly happened
during Chinese Lunar New Year which usually falls in January. Yuan and Gupta (2014)
investigated the effect of Chinese Lunar New Year in major Asian stock markets
including China, Hong Kong, Malaysia, Japan, South Korea, and Taiwan. The findings
of the study stated that there is a significantly positive effect of Chinese New Year
towards financial market changes on the countries they studied. This study supported
Chien and Chen’s finding (2010) that Chinese Lunar New Year enlarges the financial
market transaction and risk, proven by the stimulated demand of higher risk securities
and the market had positive performance growth in the preceding year. The factor for
such enhancement is during Chinese Lunar New Year, it is given a generous bonus for
the employee and often paid in January (Chien and Chen, 2010).
Raharjo, et al. (2013) study consistent with Asness, et al. (2012), the January effect
didn’t affect the performance of the Indonesia stock market. The study suggested that
December gave more impact on the market return than January, the research found that
return of the market in December was peaking to 5.21% with standard deviation 4.74%
and low losses at -2.79%. However, several factors supporting December effect to
happen is quite similar to Chinese Lunar New Year financial turnover, the investor most
likely to buy and sell stock during December because they gained year-end bonuses
(Raharjo et al., 2013).
The pattern of expected returns then utilized by investors to predict future gains, thus
the violations of the random walk could be explained by behavioural theory (Daniel and
Moskowitz, 2013). Either ascending or decreasing pattern on market returns indicate that
stock performance such that investors will take confident action to trade and willing to
take higher risk. The implications of such a decision showed a sign of market
overreaction and overconfidence. DeBondt and Thaler (1987) argued that investors tend
to overweight or underweight base rate data regarding the market performance.
Therefore, Kahneman and Tversky (1979) tried to explain the violation of random
walk theory in the efficient market hypotheses using a cognitive approach. Kahneman
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and Tversky (1979) believe that investors can take irrational action and exploit the
domain of loss when making a financial decision. Since investors consider they have
sufficient capability to analyse and predict expected returns, they become irrational
resulting in a market bubble. Contradicts to Fama’s (1970) argument that investors will
behave accordingly to the pieces of information published to fully reflect stock price.
B. The Implication of Momentum Strategy

Kent and Moskowitz (2013) describe a momentum strategy as a method to
categorized past winners and past loser based on their performance for 6-12 months.
Chui, et al. (2010) refers momentum strategy as the observations to find out which stocks
that perform well in the recent past continue to perform well in the future. A momentum
strategy then described as observations for a group of stocks which categorized over the
period according to their past performance to gain profitable portfolio in the future (Chui,
et al., 2010).
A momentum strategy is a method that involved categorization between winner and

loser stocks or glamour and value stocks as we can find on Kent and Moskowitz (2013).
This method allows investors to sort stocks according to their performance for the past 6-
12 months. After sorting, investors will begin to sell past losers and buy past winners.
The momentum strategy is often associated with the overreaction behaviour of the
investors in the financial market. The behavioural explanations for momentum strategy
prove that investors may become irrational, and it contradicts with Efficient Market
Hypothesis. Hence, behavioural explanations are expected to explain the anomaly
according to the psychological perspective (Kent and Moskowitz, 2013).
Prior empirical literature in finance and macroeconomics found that investors usually
conduct portfolio choice and consumption during the final month of the year (Jaganathan
and Wang, 2007). It is plausible since Christmas or long period vacation by the end of
the year enables the company to give more bonuses. Besides, tax consequences of capital
gain and losses do exist. However, prior studies have found limited evidence of a relation
between return-based anomalies that happened in momentum strategy, reversals, or
seasonal effect and intuitive economic risk factor. Therefore, Liew and Vassalou (1999)
constructed a return-based factor for ten developed markets. The study confirmed that
momentum strategy is profitable and very sensitive for rebalancing period, consistent
with Rouwenhorst (1998).
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De Bondt and Thaler (1985) believe that there is a market overreaction that affects
the volatility of the price in the financial market. The existence of price to earnings ratio
could explain the behavioural anomaly of seasonal effect phenomenon. If the P/E of a
company hit the lowest level, the company considered temporarily undervalued because
investors will become highly pessimistic after a series of bad returns. Otherwise, once
the returns gain better increase, the price will be adjusted (Bondt and Thaler, 1985).
Price adjustment usually worked as a seasonality of price correction. According to

De Bondt and Thaler (1987) study, the past losers beat past winner consecutively in five
years and the “price correction” phenomenon usually occurs in January, especially for
the losers. Therefore, there is a correlation between momentum strategy and January
effect anomaly such that it is suggested that the stock price will also change if there is a
great tragedy happens in one country. The information regarding the political situation,
natural disaster, and macroeconomic regulation hypothetically will affect investors to
overreact (DeBondt and Thaler, 1987). Thus, the stock price will be adjusted, and more
likely past losers will outperform past winner, especially in January.
A financial market is assumed as random walk and unpredictable according to

Efficient Market Hypotheses (Fama, 1970). However, a momentum strategy that has
been conducted by former studies showed that investment management significantly
depends on the stock return’s anomaly analysis. In addition, rational investors tend to
exploit low-risk investment which affecting market efficiency and optimal investment
policy (Daniel and Moskowitz, 2013). Consistent to Moskowitz and Grinblatt (1999) that
suggest investors are able to outperform buy-and-hold strategies by acquiring past
winning stocks and short sell past loser stocks, the strategy later referred as ‘individual
stock momentum’.
Furthermore, Moskowitz et al. (2011) explained that time series momentum showed
powerful and steady performance in diverse asset classes even in such an extreme trading
period. According to Moskowitz’s (2011) argument, a momentum strategy
hypothetically considered being profitable and applicable in the future. Provided
evidence of the study showed significant performance on how well past losers and past
winners generate returns for investors. However, the finding was contrary to Behavioural
Theory because it was tested into a wide range of investors and the result show
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consistency, momentum strategy applies to almost all investors regardless of the level of
rationality and risk attitude (Jagadeesh and Titman, 1999).
By applying the momentum strategy to form a portfolio, rational investors consider

their action as an arbitrage opportunity (Moskowitz and Grinblatt, 1999). The behaviour
of rational investors showed that they are most likely generate profit by taking the low-
risk portfolio in such a big number and doing it persistently. The implication of this
treatment is investors will be underreacting to irrelevant information across the firms.
The argument supported by Prospect Theory (Kahneman and Tversky, 1979) the attitude
of investors towards irrelevant information is a form to justify the action of loss aversion
when investors feel more painful moment to lose smaller returns than gain bigger profit.
Conrad and Kaul (1998) suggested a behavioural model that captures opposite
predictions between past losers and winners returns over the period following the
portfolio-holding period. Conrad and Kaul (1998) believe that overreaction to
information caused the increasing of holding period returns such that the price of a
formed portfolio as the winner is above the long-term value and otherwise. Jagadeesh
and Titman (1999) reproduced the models using the sample period of 1965 to 1997 and
the result of the cumulative return is negative. The evidence of return reversals exists
only in the fourth and fifth years following the formation date, the finding is consistent
with Conrad and Kaul (1998) simulations for the effectiveness of holding period return.
A momentum strategy-based portfolio has a suggestive probability of changing

market beta. Both increasing or plummeting market beta might drive a momentum crash,
Kothari and Shanken (1992) explained that the sorted past return of portfolio has time-
varying exposure of systematic factors. The beta of past winner will consist of positive
loading factors that affect realize return of the formed portfolio over a time period. The
argument is supported by Grundy and Martin (2001), their study explicates that when a
market crashed, the betas of the momentum strategy portfolio will downturn accordingly.
Whilst momentum strategy is effectively applied by the investors, the volume of

winner stock trading will eventually increase. The argument supported by Mardiah
(2002) that is linear with Rosenberg et al. (1985) the trading market volume escalate by
the time momentum strategy takes effect. Interesting fact also proved by Luxianto (2014)
that momentum strategy could be efficiently utilized in Indonesia’s financial market.
According to the study, the winner portfolio with three-month holding period will
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generate 3.27% profit better than a shorter period that only generates 2.75%. The
implication of the study is to overcome the loser portfolio by involving contrarian
strategy (Luxianto, 2014).
3. Data
A. Sample
Former studies examine the volatility and the effect of momentum strategy using a
various return of the stocks. Jaganathan and Wang (2007) produced the results of their
study using calendar year returns matched with growth rates in year-over-year, this
method allowed them to avoid the need to explain the various well-documented seasonal
pattern in stock returns, such as January Effect. The idea of constructing data through the
fundamental component analysis of returns can serve as valid factors (Chamberlain and
Rothschild, 1983). In another way, Fama (1993) constructed factors by taking long and
short positions in two asset classes that earn vastly different returns on average.
Using IDX monthly return data from 2004 to 2017 that were collected from Yahoo
Finance, this study is expected to construct past winners and past losers’ group from LQ-
45 index. LQ-45 index is a stock market index consists of 45 companies that perform
well on the Indonesian financial market. The parameter to determine a stock as LQ-45
are have been included as the top 60 companies with the highest market capitalization,
included as the top 60 companies with the highest transaction value in regular market for
12 months, have been listed in Indonesia Stock Exchange for at least 3 months, and have
good financial conditions and prospect of growth.
The sample of the study was constructed using purposive sampling based on the
following considerations: 1) the companies should have been listed at least 5 years
consecutively in LQ-45 index; 2) the selected companies initial public offering has to be
earlier than 2002; 3) the selected companies must represent the different industry in
Indonesia. Therefore, the sample was constructed as 15 firms out of 45 after eliminated
by such criteria as presented in Table 1. The companies that are going to be examined in
this study are PT. Astra Argo Lestari, Tbk (AALI), PT. Adaro Energy Limited (ADRO),
PT. Astra International, Tbk (ASII), PT. Aneka Tambang, Tbk (ANTM), PT. Bank
Central Asia, Tbk (BBCA), PT. Bank Rakyat Indonesia (Persero) (BBRI), PT. Bank
Negara Indonesia (Persero) (BBNI), PT. Bank Danamon Indonesia, Tbk (BDMN), PT.
Bank Mandiri (Persero) (BMRI), PT. Bumi Resources, Tbk (BUMI), PT. Indofood
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Sukses Makmur, Tbk (INDF), PT. Indocement Tunggal Prakasa, Tbk (INTP), PT.
Indosat, Tbk (ISAT), PT. Kalbe Farma, Tbk (KLBF), and PT. Telkom Indonesia
(TLKM).
Table 1. Sampling criterions to determine the final sample of the study
Number Sampling Criteria Number of

Stocks
LQ-45 stock index 45
1. Companies should have been listed 5 years (22)
consecutively in LQ-45 index
2. Initial Public Offering earlier than 2002 (2)
3. Represents different Industry in Indonesia (5)
Final sample 15
source: modified data from Yahoo Finance
B. Procedures
Bondt and Thaler (1985) conducted an empirical study based on Beaver and
Landsman (1981) design. The study aims to test semi-strong form market efficiency
start, at time 0, it was assumed that portfolios’ formation gives impact to all stocks of the
portfolio. Then the estimated residuals of portfolio return on next period (t>0) equal
zero. The study assessed which systematic nonzero residual return behaviour in the
period after portfolio formation, the stocks that gained extreme capital gains or excessive
loss over the period over five years will be categorized as “winner” (W) and “loser” (L).
According to the model given by Bondt and Thaler (1985), the empirical analysis of
this study will be conducted using the following procedures:
1. The stock return data will be conducted from 2007 to 2017 on a monthly basis,
resulting in 120 periods. There’s no additional stock because we want to know
which past winner or past loser who has stable performance in LQ-45 index.
2. Past winner or loser are formed by calculating the cumulative excess return
average for every 36 months. The cumulative excess return (CU) is ranked from
the highest to the lowest resulting in 8 past winners and 7 past losers.
3. To investigate the residuals of the formed portfolio, the study uses CAR
(cumulative average return) which calculated for Winner and Loser between t = 1
and t = 36. The overreaction hypothesis will predict that for t > 0, ACARW,t < 0
and ACARL,t >0. Thus, Bondt and Thaler using the equation below to find a
significant difference in investment performance:
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# #
𝑆"# = %∑3 3
-45'𝐶𝐴𝑅+,-," − 𝐴𝐶𝐴𝑅+," 0 + ∑-45'𝐶𝐴𝑅2,-," − 𝐴𝐶𝐴𝑅2," 0 6 /2(𝑁 − 1)(1)
Thus, the variance of the difference of sample means equals 2S2t/N and the t-
statistic is calculated using the equation below:
𝑇" = [ACAR 2," – ACAR +," ]/D2S"# /𝑁 (2)
4. The sample of Standard Deviation will be calculated from the equation given
below:
#
𝑠" = G∑3
-45'𝐴𝑅+,-," − 𝐴𝑅+," 0 /𝑁 − 1(3)
The equations given above are aimed to find the residuals value and used to predict
the overreaction of momentum strategy in this study. The number given by the equation
will be presented in the appendix and will be tested using Ordinary Least Square method.
C. Portfolio Formation
Forming Portfolio Period 1 (2007-2010)
Conducting 120 monthly based return of each stock, the return was calculated using
(Ross, 2001) formula:
IJK
𝑅H" = − 1(4)
IJKLM
where:
Rit = Return of stock i at time t
Pit = Price of stock i at time t
Pit-1 = Price of stock i at time t-1
Calculated return then summarized by calculating the average return of each stock to
determine which stocks categorized as past winner or past loser. Stocks formed as past
winner if the cumulative average return (CAR) is above 100% (>1) and included as past
loser if the return is below 100% (<1). The result of the average monthly return during
2007 - 2010 (36 month) period categorized as follows:
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Table 2. Past Winner and Past Loser Formation Period 1 (2007-2010)
No. Past Winner Average Past Loser Average

Return Return
1. BBRI 1.71 BDMN 0.13
2. BBNI 3.65 ISAT -0.26
3. INDF 2.47 TLKM -0.16
4. AALI 2.15 BBCA -9.55
5. ADRO 500.30 ASII 0.25
6. BUMI 2.54 ANTM -1.99
7. INTP 2.02 BMRI 0.73
8. KLBF 0.53
PT. Adaro Energy Limited, Tbk (ADRO) gained the highest average return during
2007-2010, according to Suhartono (2008) Adaro raised around US$ 1.32 billion in their
first initial public offering during this period. Then, Adaro became the largest coal miner
industry and continue to attract local investors because the coal prices ascending, and the
debt pressed so the net income will be greater. Thus, it was plausible that Adaro could
gain average return 500.30 for 4 years.
On the other hand, the lowest average return of LQ-45 stock index belonged to Bank
Central Asia, Tbk (BBCA). The return that dropped into -9.55 was caused by stock split
decision during 2008. Suprapto (2008) stated that the stock split policy took effect on the
decreasing stock price from Rp 7.200 to Rp 3.600. During that period, BBCA recorded to
hit the lowest price at Rp 2.275 and the highest price at Rp 3.800 (Detik.com). Therefore,
it was logical that BBCA average return during 2007-2010 only hit -9.55.
The past winner formation during 2007-2010 period then consisted of a various range
of industries: two financial industries were represented by Bank BRI, Tbk (BBRI) and
Bank BNI, Tbk (BBNI); PT. Indofood Sukses Makmur, Tbk (INDF) represents food
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industries; there are three mining industries categorized as past winner (AALI, ADRO,
and BUMI); the last one is PT. Indocement Tunggal Perkasa, Tbk (INTP) representing
infrastructure industries. Meanwhile, the past loser category filled by three financial
institutions represented by Bank Danamon, Tbk (BDMN), Bank BCA, Tbk (BBCA), and
Bank Mandiri, Tbk (BMRI); two telecommunications industries PT. Telkom Indonesia
(TLKM) and PT. Indosat, Tbk (ISAT); one mining manufacture PT. Aneka Tambang,
Tbk (ANTM); one automotive manufacturer PT. Astra International, Tbk (ASII); and
one pharmaceutical company PT. Kalbe Farma, Tbk (KLBF).
Using a similar formula from Ross (2001), the calculated average return during the
second 36-month period (2011-2014) summarized in the table below. Resulting Bank
BRI, Tbk (BBRI) as the stock with the highest average return and PT. Adaro Energy
Limited, Tbk (ADRO) who has the lowest average return.

Return Return
1. BBRI 7.00 BDMN -0.33
2. BMRI 1.18 ISAT -0.47
3. KLBF 2.11 BBNI 0.51
4. TLKM 1.07 INDF 0.47
5. BBCA 2.03 ASII -1.17
6. ANTM -0.58
7. AALI 0.22
8. BUMI -1.94
9. ADRO -27039.69
10. INTP 0.86
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Bank BRI, Tbk (BBRI) reported to gain Rp 15.08 billion net profit during 2011 and
resulting to the highest average return in second-period portfolio formation. According to
Kompas.com, credit growth managed by Bank BRI developed at the level of 14.83%
followed by diminishing NPL 2,3 from 2,78 on 2010 which was considered as a good
sign for investors. Approximately 34% of Bank BRI’s stock owned by foreign investors
(Putra, 2011), this ownership indirectly affects the growth return of BBRI from 1.71 at
the first formation period (2007-2010) to 7.00 at the second formation period (2011-
2014).
Different from their past performance, PT. Adaro Energy Limited, Tbk (ADRO) as
the mining industry recorded the lowest average return by -27039.69. The former past
winner during the first formation period (2007-2010) shows bad performance in gaining
return during 2011-2014. The reason for their low average return was the dropping price
of coal in the international market, it caused depleting net profit of Adaro by 19% (Jati,
2015). To overcome the problem, Adaro tried to enhance the cost efficiency of their coal
distribution and started to enter electrical power business.
Then at the second formation period, there are only five past winners: BBRI along
with BMRI who formerly inhibit past loser category; KLBF, TLKM, and BBCA also rise
up from past loser stocks to replace ADRO, INDF, and INTP in past winner category. On
the opposite, past loser stocks number added up to 10 stock including former past
winners such as ADRO, INDF, INTP, and BBNI. ISAT, ANTM, and ASII stay as past
loser stocks regarding their low average return for two formation period.
Repeating similar procedure, the portfolio formation for the third-period results are
summarized in Table 4. The highest average return for the last formation period belongs
to Adaro with 14221.33 and the lowest average hit -2.33 belongs to PT. Astra Argo
Lestari, Tbk (AALI). The lowest average return remarks the worst average return for
AALI during 3 formation period (120 months). During the first and second formation,
AALI’s average return remained positive and turned otherwise on 2015-2017.
16

Return Return
1. BBRI 6.81 BDMN 0.73
2. BMRI 15.72 TLKM 0.27
3. ANTM 4.82 BBNI 0.24
4. ISAT 1.68 INDF -0.13
5. BBCA 2.41 ASII 0.00
6. ADRO 14221.33 AALI -2.33
7. BUMI 0.36
8. KLBF -0.69
9. INTP -0.17
10.
Among the other stock, ADRO shows significant sign of momentum strategy. During
the first formation, ADRO categorized as past winner and then outperformed by the
second period of portfolio formation. Lastly, ADRO categorized as past winner again
with the highest average return. Adaro’s good performance during 2015-2017 cannot be
detached from the fact that the mining company successfully achieve net profit escalation
by 44% from the previous year (Budiarti, 2018). In 2017, Adaro’s net profit reported to
be US$ 483,3 million, approximately 62% profit growth year-on-year at that time
(Pratiwi, 2018). The implications of this phenomenon made Adaro shared their dividends
(US$ 250 million) and attract more investors to support them (Kencana, 2018).
In contrast with Adaro Energy Limited, Tbk, PT. Astra Argo Lestari, Tbk (AALI)
suffered plummeting net profit during 2015-2017 period because of crude palm oil
inclining price. Haffiyan (2018) reported that crude oil price fell off 12% and causing net
17
profit decreased Rp 500 Million. Not only AALI, another crude palm plantation listed in
IDX during 2015-2017 experienced similar issue (Yudhistira, 2015). Therefore, the
investors compensate their lost by cutting off the loss and restore their funds to other
industries.
Thus, the past winner on the last period of portfolio formation (month 85 to 120)
consist of BBCA, BBRI, and BMRI as the representative of the financial industry; ISAT
as the representative of telecommunication industry; lastly ANTM and ADRO which
belong to mining manufactures. The past loser surprisingly filled by the other 9 listed
company: BBNI, BDMN, INDF, KLBF, TLKM, AALI, BUMI, INTP, and ASII.
D. Methodology
Once the stocks have been shaped into portfolio formation, an empirical study can be
done. The empirical method that is being used in this study is residual diagnostics, the
study includes graphic analysis for each period, normality test, OLS estimation,
heteroskedasticity test, finally the table presented to compare residuals for the specific
holding month starting from 1 to 36 month. The data was compiled using Eviews and the
heteroscedasticity was tested using Breusch-Pagan-Godfrey to estimate the variances of
the data such that the variances do not depend to independent variables.
18
4. Empirical Analysis
A. The Overall Graph of Past Winner and Past Loser Over the Period
The finding of this study is quite impressive and different from DeBondt (1985).
Although compiled raw data shows that there is a reversal for particular stock such as
ADRO the overall result of the study did not show a significant outcome that past losers
outperform winner and otherwise. The result is summarized in Figure 1 below:
Figure 1. Cumulative Average Return for Winner and Loser Portfolio (1-120 month
test period) compiled data using Eviews
For 120 months period, none significant pattern captured for both Winner (green line)
and Loser (red line) stocks outperforming each other. The result shows fluctuate pattern
of loser stocks during second-period of portfolio formation. The swift change occurs a lot
to cause loser stocks peaking and plummeting exceptionally. In contrast, winner stocks
show stable cumulative average return over the period. Winner stocks change only
happened during the last quartal of first formation period and at the beginning of the last
formation period.
19
Figure 2. Cumulative Average Return for Winner and Loser Portfolio (period 0-36)
compiled data using Eviews
Figure 2 explains that during the first formation period, there is no noteworthy
difference between past winner (green line) and past loser (red line). Started from the
beginning, the graph doesn’t show fluctuating CAR (cumulative average return) for both
portfolios. However, at month 33, there is a sudden rise from winner portfolio. The CAR
(cumulative average return) of winner portfolio during that time reached 4965.32.
Unfortunately, it didn’t last long because during the last quarter of 2010 the price fell
extremely to -531.31 and inclined by the end of 2010 to 1955.15.
Figure 3. Cumulative Average Return for Winner and Loser Portfolio (period 37-
72) compiled data using Eviews
20
Contrary to the first period, there is notable fluctuation in second-period portfolio
formation. Past loser stocks (red line) started the formation with rising CAR (cumulative
average return). The most extreme decreasing occurs during the second to third quarter
of 2014 (month 66), the lowest CAR (cumulative average return) during the period is -
40907.71. Meanwhile, the highest peak happened during month 48, the CAR (cumulative
average return) recorded 6615.88. Nevertheless, according to Figure 2 past losers shows
a good performance over the period and outperform past winner (green line) in terms of
overall return.
Opposite to the first portfolio formation, past winner cumulative average return is
doing well on the first quarter (month 73-76). After peaking at 18.000 it suddenly drops
significantly and stays consistent in the level of 0 as presented in Figure 4 below.
Figure 4. Cumulative Average Return for Winner and Loser Portfolio (period 73-
120) compiled data using Eviews
B. Main Findings
According to DeBondt (1985) model which has explained in Section 3B above, the
CAR for t > 0 assumed CARW,n,t will be less than 0 and CARL,n,t will be more than zero
for the model to proof overreaction in the market. However, the result of this study is
inconsistent with DeBondt (1985). According to residuals shown in Table 5 below, the
residuals did not show any significant effect of momentum strategy in conducted
samples.
21
Table 5. Differences in Cumulative Average Residual Returns Between the Winner
and Loser Portfolios (month 1, 12, 13, 18, 24, 25, 36)
source: modified data

The residuals presented in the table above have been tested using Breusch-Pagan-
Godfrey method to measure the heteroscedasticity in a linear regression model,
probability measurement exhibit 0.1376 greater than 0.05. The result means that the data
are statistically significant and heteroscedastic, and the R-square is 0.936517 which
means the data is a good fit with 93.6% percentage. However, justifying from the
residuals for each month according to the Table 5, it can be concluded that there is no
market overreaction or seasonal effect in sample stock price.
Residuals in January (month 13 and 25) usually less than December (month 12 and
24) as shown on first portfolio formation period (2007-2010). The t-statistics of CAR
(cumulative average return) difference in month 12 during the first-period is 0.08965
greater than month 13 (0.05579) as well as on month 24 (0.09293) more than month 25
(0.0525). Yet during second-portfolio formation period, month 12 (-0.0037) is less than
month 13 (0.109). Thus, December effect or January effect doesn’t apply in this study.
The number of CAR (cumulative average return) at the end of the portfolio formation
period does not show significant change either. During the first and second period of
portfolio formation, both loser and winner CAR (cumulative average return) has similar
number, 10.89 and 121.44 respectively. Nonetheless, enormous change happened at the
end of the portfolio formation period. The final CAR (cumulative average return) of
winner stocks is 358.72 less than loser stock which recorded 116101. Hence, once again
overreaction of the market cannot be proven by this study. In contrast, CAR (cumulative
average return) at the end of each period showed that loser stocks did better than past
winner stocks.
22
5. Discussion
Consistent with Chui, et al (2010) study, momentum strategy does not effective to
gain abnormal return in Indonesia financial market, particularly for stocks that have
listed in LQ-45. Since LQ-45 has been constructed from diversified company, the
opportunity to apply momentum strategy is not plausible. The flow of information,
market development, and the reputation of LQ-45 stocks also included as the variables
that might influence the probability of momentum strategy in this study.
Since LQ-45 has already compiled from diversified industries and proved that
momentum strategy is implausible to take an effect, inconsistent with Moskowitz and
Grinblatt (1999) study. In their study, Moskowitz suggests that reversals can be more
profitable and more implementable if the industry were not similar. Supported by Berk,
Green, Naik (1999) that variety of industries can generate changes to the firm’s growth
causing momentum in returns. In fact, the growth itself is likely correlated among similar
type of industries. Yet, the returns created by momentum for LQ-45 stock index is not
sufficiently consistent through the period.
In addition, this study unable to justify significant momentum strategy as profitable

method according to industrial type. Contradicts to Moskowitz and Grinblatt (1999)
argument that industry momentum is strongest in short-term (one-month horizon)
holding period. The result of this study shows the opposite, mining manufacture
unqualified to preserve their position as the winner both in short term and long-term
period. Change does exist, and industrial momentum does not apply in Indonesia
financial market.
The findings of this study also linear with Liew and Vassalouw (1999) where
momentum strategy is considered unreliable to predict an abnormal return in Indonesia
stocks market. Similar to Japan market, samples in this study tend to generate negative
average return and fluctuate. Therefore, it is difficult to continue categorizing stocks as
past winner or past loser because the portfolio formation does not give much effect on
return in the future.
The momentum strategy is difficult to detect in an emerging market because it has

high volatility, linear with Mardiah (2002). According to the result of this study, past
loser during the second portfolio formation period has high volatility as a proof that past
loser cannot outperform past winner consistently. The fluctuations of the past loser also
23
represented on the difference of CAR (cumulative average return) that shows
inconsistent residuals in each holding month.
According to Daniel and Moskowitz (2013) momentum strategy volatility is actually

predictable and distinct from the predictability of mean return. They suggested that by
multiplying Sharpe Ratio twice, momentum strategy still unable to outperform optimal
dynamic strategy. The possibility of momentum crashes will be generated as long as
conditional beta and option-like feature of losers exists.
The result of the study implies that the Indonesian investor aware of published
information related to market change. In case of momentum strategy, it is assumed that
momentum traders exist to exploit slow price movement. Hong and Stein (1999) suggest
that slow diffusion into prices initiate underreaction to news and subsequent reversals.
The underreaction to information caused by slow diffusion barely occurs in Indonesia
stock market because approximately 41.4% of stockholder choose mutual funds rather
than becoming an independent investor (Fauzia, 2018). By becoming a mutual fund
customer, investors usually well-educated and offered more assistance in technical
analysis so the information published within the market utilised properly (Fauzia, 2018).
There is also a probability that individualism does not apply for Indonesian investors,
as suggested by Odean (1998) and Chui et, al (2010). The weakness of individualism
effectuates weak momentum strategy as happened in East Asian countries. According to
Chui et, al (1998) countries that exhibit the most momentum have individualism indexes
in the top 30%. Since individualism level in Indonesia is low (14%) as shown in Figure 5
below (according to hofstede-insights.com), momentum strategy is unreliable. To sum it
all, this argument consistent with De Long et, al (1990) that suggest Indonesian investors
are sentiment-free.
24
Figure 5. Indonesia Value of 6 Dimensions (source: hofstede-insights.com)
Perceived from behavioural finance point of view, the study implies that Indonesian
investors are not associated with self-attribution bias. Unlike Daniel, Hirshleifer, and
Subrahmanyam (1998) study that investors who suffer such bias will have the ability to
pick winners and overestimate the exact positive signals of winner stocks. Self-
attribution bias caused the investors to be overconfident and select only winning stocks
to gain return. Even though appear to be promising positive signals from momentum
strategy or winning stocks does not guarantee a substantial gain in the future.
However, the finding of this study is inconsistent with Luxianto (2014) that
momentum strategy is effectively applied for Indonesian stock market. In contrast, the
argument that loser stocks can be predicted using contrarian strategy in the future
perhaps plausible for future research. Because there is a significant sign that particular
stocks rebound from past loser to past loser in the mean of time, PT. Adaro Energy
Limited, Tbk proved the ability of this phenomenon. In addition, loser stocks recorded
higher CAR than winner stocks at the end of formation period showing a good sign that
loser stocks able to outperform market using a different strategy.
The study unable to show seasonal effect either, there is no sign of anomaly during
January for each holding period. Contrary to Daniel and Marshall (1997) argument
regarding the correlation between equity returns and growth rate in aggregate per capita
25
consumption. It is assumed that during January, investors will more likely receive more
funds, so they can invest in such a big number. Nonetheless, Indonesian investors tend to
invest more on December, but the pattern is inconsistent.
Linear to Miron and Beauliu (1996) study that seasonal behaviour of GDP usually
occurs in form of inclining consumption in the fourth quarter and declining in the first
quarter. During the first and third formation period, past winner shows decreasing
average return in the first quarter and increasing average return in fourth quarter. The
assumption behind the behaviour is Christmas demand and year-end bonus allow
investor to invest more by the end of the year.
6. Conclusion
Momentum strategy seems promising to predict the future return in financial market.
The strategy has been successfully utilised in the European and Western country
(Moskowitz, et al., 2011) and (Asness, et al., 2012). However, momentum strategy
usually associated with the overreaction of the market because investors tend to be
overconfidence of information they already had (Kent and Moskowitz, 2013). Therefore,
momentum strategy can cause momentum crash if investors excessively utilise it.
On the other hand, this study appears to show that momentum strategy is ineffective
in the Indonesian stock market. The factors that support this argument are: Indonesia
stock market is emerging, so it is volatile and momentum strategy is hard to investigate
(Mardiah, 2002). The samples of the study gathered from reliable index LQ-45 that
means the samples are already the winner of Indonesia stock market, and diversified
industries in Indonesian seems cannot be exploited by momentum trader to gain future
return contrary to Moskowitz and Grinblatt (1999).
The behavioural explanation that momentum strategy is implausible in Indonesia

suggested as follows: Investors are not underreacting to information, thus there is no
slow diffusion of information (Fauzia, 2018). The argument supported by the fact that
more Indonesian investors choose to invest in mutual funds which regularly send them
technical information about the market (Fauzia, 2018). Besides, momentum strategy
tends to be more plausible for individualism country meanwhile Indonesian level of
individualism is low (DeLong, et al., 1990).
Hence, according to the result of the study, it might be not profitable to apply
momentum strategy for stock trading. Momentum strategy will take effect if being
26
applied along with another strategy such as contrarian strategy (Luxianto, 2014). The fact
that past loser has the probability to outperform past winner, contrarian strategy appears
to be more promising in the future.
Despite the fact that momentum strategy is not effective and not applicable for
Indonesia stock market, the study shows that Indonesian investors perhaps still rational
and rely on published information to make a financial decision (Fauzia, 2018). Thus, it
can be concluded that the Efficient Market Hypothesis worked in Indonesia stock market
since the market price fully reflects the absorbed information. Hopefully, the finding of
this study can help related institutions avoid market crash caused by the irrational
behaviour of investors.
On the other hand, the study has limitations and needs improvement in the future.
First, the sample of study needs to be elaborated to a bigger scope of industries, for
example, using all stocks that listed as LQ-45 or comparing blue-chip stocks with small
stocks from various industry. This study probably has small sample bias since the sample
is too narrow for LQ-45 stock index. Second, this study did not use systematic risk or
risk correction as the approach to measure risk explicitly. Hence, for future research, it is
highly suggested to include CCAPM, risk correction, and beta to replicate DeBondt
(1985) procedures. An experimental research also can be done to investigate momentum
strategy further in Indonesia stock market. Additional variable such as: market
capitalization, book-to-market equity, and price-to-earnings ratio can be included to test
supporting variables for momentum strategy implementation in Indonesia.
27
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31
Appendices
Past Winner Return During 2007 to 2017 (120 month)
BBRI BBNI BDMN BMRI INDF ISAT KLBF TLKM

31/1/2007 -0.29 -1.25 -1.19 -8.28 -38 -0.67 -10 -2.683
28/2/2007 0.14 -0.53 3.34 5.79 -10 2.01 -2 2.477
31/3/2007 0.03 7.48 -0.95 18.21 22 3.01 2 2.477
30/4/2007 0.51 6.23 2.39 6.62 18 0 -2 -3.302
31/5/2007 -0.22 0.44 -1.67 -4.14 59 -2.01 15 0.413
30/6/2007 0.22 0 7.16 10.76 -10 3.35 11 5.366
31/7/2007 0.12 -5.56 -0.37 -1.58 -8 1 -7 0.118
31/8/2007 0.17 1.05 2.56 2.11 6 2.7 -0.6 -0.118
30/9/2007 0.49 -0.13 1.46 1.4 24 7.71 0.4 -0.471
31/10/2007 -0.09 -2.09 -4.02 -2.11 30 -3.85 -3.2 -0.667
30/11/2007 -0.26 1.44 -2.92 -0.7 5 2.7 0.8 -0.079
31/12/2007 -
-0.23 -3.01 -5.85 -1.23 25 12.33 -1.4 -0.517
31/1/2008 0.12 -1.31 3.29 -0.7 7.5 -2.7 -3.4 0.323
29/2/2008 -0.4 -3.14 -3.29 -0.35 -50 3.85 -0.4 0.032
31/3/2008 -0.2 -2.48 -8.77 -1.93 -5 -8.09 -1.4 -0.517
30/4/2008 -0.09 0.65 -0.37 0.18 52.5 -3.08 -0.4 -0.614
31/5/2008 -0.43 -0.65 -7.31 -2.11 -40 7.71 -0.6 -0.517
30/6/2008 0.46 2.88 3.24 2.28 -15 -1.54 -0.8 0.097
31/7/2008 -0.03 -5.8 0.46 -0.39 2.5 -1.54 -0.6 0.226
31/8/2008 -0.28 -10 -1.85 -0.39 -5.58 -1.33 -1.6 -0.471
30/9/2008 -
-0.99 -12.9 -10.3 -2.86 20.23 -3.46 -3.92 -1.145
31/10/2008 -0.05 1.61 -0.46 -0.29 -4.65 -1.6 0.64 0.37
30/11/2008 0.6 4.19 2.55 1.46 -1.86 0.8 0 0.808
31/12/2008 -0.01 1.61 -4.63 -0.54 1.16 -1.06 0.96 -0.674
31/1/2009 -0.32 -2.26 1.97 -0.11 -1.86 -7.45 2.8 0.202
28/2/2009 0.29 0.97 2.78 1.25 2.33 2.79 -0.32 0.876
31/3/2009 0.81 15.48 3.01 1.38 8.37 4.66 4.64 0.37
30/4/2009 0.18 8.06 2.55 0.33 12.33 -1.6 0 -0.202
31/5/2009 -0.05 3.87 3.82 0.39 2.09 -2 1.92 -0.067
30/6/2009 0.43 4.84 0.23 5.12 8.95 2.13 4.8 0.707
31/7/2009 0.12 5.93 -2.39 -0.83 2.91 -2.39 -0.8 -0.337
31/8/2009 0.06 27.85 2.66 4.01 11.7 0.87 1.28 0.23
30/9/2009 -
-0.33 32.59 -4.52 0 2.13 -1.45 -1.12 -0.23
31/10/2009 0.09 21.92 -1.86 -1.38 0 -1.45 0.16 0.574
30/11/2009 0.03 -2.37 1.59 0.83 9.57 -0.87 0.64 0.344
31/12/2009 -0.09 -7.11 2.39 -1.38 -1.6 5.21 3.52 -0.153
31/1/2010 -0.24 -2.37 3.45 -1.11 4.79 -1.74 -0.64 -0.765
28/2/2010 0.62 46.81 0.53 4.84 0 2.31 4.48 -0.077
31/3/2010 0.15 32.59 3.72 3.04 1.06 0.87 3.92 -0.23
30/4/2010 -0.18 0 -5.85 -2.21 -4.79 -4.63 -2.32 -0.191
31/5/2010 -
0.56 14.81 3.72 4.7 12.23 -0.58 4.32 0.191
30/6/2010 0.47 82.95 1.6 0.83 7.45 -0.43 6.4 0.574
31/7/2010 -0.33 9.48 0 0.25 -1.06 -2.6 -0.29 0.191
31/8/2010 0.87 4.99 4.8 5.89 10.22 7.62 0.57 1.495
30/9/2010 2.95 4.49 8.53 0.74 -3.76 2.9 0.36 -2.243
31/10/2010 -3.5 2.99 -2.13 -3.44 -5.65 -4.35 2.07 -5.234
30/11/2010 -0.77 -6.24 -6.93 -0.98 0.81 1.09 -0.71 -1.495
31/12/2010 -
83.41 12.11 4.8 -2.46 -2.69 -4.17 -1.43 -3.364
31/1/2011 -0.87 6.84 5.33 -5.04 1.08 0.91 0.14 -0.068
28/2/2011 3.72 7.37 2.66 22.91 6.45 1.45 1.36 -0.101
31/3/2011 2.62 2.11 -2.66 7.64 2.15 -0.36 0.29 0.27
30/4/2011 -0.87 -4.21 0 -3.82 -2.15 -0.73 -0.07 -0.034
2
31/5/2011 1.09 1.05 -1.22 1.27 3.23 -1.09 -0.21 -0.27
30/6/2011 0.87 11.58 -4.86 14 3.76 2.9 0.07 0.101
31/7/2011 -0.98 -6.82 -3.24 -4.98 -3.23 -2.54 -0.11 -0.159
31/8/2011 -1.21 -6.82 -5.77 -2.28 -6.77 -4.2 -0.42 0.032
30/9/2011 2.2 9.09 5.84 5.8 2.82 5.88 0.89 0
31/10/2011 -0.08 -1.89 -4.17 -1.66 -2.26 3.36 0.32 -0.032
30/11/2011 0.38 0 -2.5 1.45 -0.75 5.04 -0.26 -0.191
31/12/2011 0.08 -3.03 3.96 0 1.32 -2.52 0.21 -0.127
31/1/2012 -0.65 2.27 -0.83 -1.24 1.88 3.36 0 0.191
29/2/2012 1.09 4.55 0.63 2.07 -1.5 -7.56 0.11 0
31/3/2012 -1.74 -0.38 8.34 1.87 0 -5.04 0.89 0.923
30/4/2012 -
-4.35 -4.55 -5.42 -2.07 -0.94 15.11 -0.32 -0.286
31/5/2012 3.7 1.52 7.18 1.24 1.32 7.98 -0.32 0.35
30/6/2012 2.83 2.27 0.48 5 4.14 10.08 0.11 40
31/7/2012 0 -3.6 -0.96 -2.38 0 7.56 1 2
31/8/2012 1 1.6 1.92 1.43 1.43 2.6 28 -4
30/9/2012 0 -0.4 0 0.95 0.57 16.27 12 0.47
31/10/2012 -
-0.43 -0.4 -7.66 -0.24 0.86 18.87 8 -1.008
30/11/2012 -0.29 1.6 -0.96 -3.1 -0.29 3.9 1.05 0.134
31/12/2012 2.86 2.8 4.79 5.95 1.14 4.56 3.16 1.008
31/1/2013 -
4.14 5.6 1.92 5 7.71 11.06 10.53 1.478
28/2/2013 -1.28 3.2 1.92 0.48 0.29 -1.3 -1.05 0.202
31/3/2013 106.37 5.6 -0.48 2.14 -0.29 -5.21 7.37 0.941
30/4/2013 105.65 -8.4 -6.22 -3.33 0.29 -9.11 7.89 -0.873
31/5/2013 44.21 -9.6 1.44 -1.76 0.86 1.95 0.53 0.402
30/6/2013 54.55 -0.8 -4.78 -0.38 -4.86 -2.6 -0.53 2.414
31/7/2013 -
-2.61 -3.97 -5.57 -4.51 -1.14 11.39 -5.29 -2.549
3
31/8/2013 1.06 2.43 -1.39 1.88 3.24 3.62 -9.41 -1.341
30/9/2013 1.06 6.18 2.19 1.38 -1.89 7.24 4.71 3.353
31/10/2013 -
-0.73 -5.29 -3.98 -1.88 0.27 15.93 -4.12 -1.677
30/11/2013 -0.49 -1.54 -0.4 0.38 -0.54 7.97 0.59 -0.671
31/12/2013 1.75 3.62 4.5 2.13 2.03 2.61 9.12 1.677
31/1/2014 1.55 2.03 -2.07 0.69 1.08 -5.94 2.65 1.006
28/2/2014 0.53 4.32 1.99 1.13 1.08 -1.88 2.06 -1.274
31/3/2014 0.24 -1.63 -1.67 0.63 -1.62 -1.3 3.82 0.469
30/4/2014 0.27 -0.35 0.56 0.75 -1.22 1.16 -0.29 4.158
31/5/2014 0.02 -0.13 -0.36 -1.01 -0.95 -9.13 3.82 -0.738
30/6/2014 0.73 2.78 -2.35 0.91 1.76 9.27 2.65 2.156
31/7/2014 -0.13 0.93 -0.83 0.27 -1.08 -5.21 -3.68 0.19
31/8/2014 -0.55 0.56 1.3 -0.91 -0.18 -1.59 1.05 2.599
30/9/2014 0.29 1.39 2.17 0.53 -1.06 -4.49 1.58 -1.458
31/10/2014 0.38 0.28 -0.2 0.32 -1.06 -4.35 3.42 0.824
30/11/2014 0.13 0.37 2.41 0.48 0.35 16.22 4.21 0.38
31/12/2014 0.02 0.56 -0.99 0.48 5.63 1.3 1.84 -0.444
31/1/2015 1.07 2.5 3.16 2.14 -0.35 0.87 -3.42 5.418
28/2/2015 0.36 1.11 2.57 1.23 0.53 4.06 3.16 -2.838
31/3/2015 -
-1.47 -3.06 -9.13 -3.69 -5.28 -5.79 -3.68 13.933
30/4/2015 0.12 3.11 3.56 0.06 3.87 -7.53 -2.11 11.869
31/5/2015 30.91 -10.2 -0.92 -1.76 -4.05 7.53 -7.11 3.096
30/6/2015 -0.27 -3.74 -0.61 -1.41 -2.99 8.69 0.26 0.043
31/7/2015 33.42 1.31 -7.24 20.2 -6.16 -11.3 -3.95 -0.596
31/8/2015 -1.36 -5.12 -7.42 -2.52 0.91 -8.26 -15 -1.874
30/9/2015 1.4 4.05 -1.72 1.64 0 12.6 3.16 0.341
31/10/2015 0.33 0.21 0.43 -0.41 -2.61 40.56 -4.47 1.96
30/11/2015 0.31 0.93 4.17 1.17 0.8 -2.9 -2.37 1.278
4
31/12/2015 -0.16 -0.55 10.55 0.82 4.66 -0.72 0.79 2.002
31/1/2016 -
-0.21 0.86 -0.12 -0.12 3.64 10.14 -2.63 -0.341
29/2/2016 0.33 0.86 -2.39 1.94 1.02 30.42 7.37 0.639
31/3/2016 -0.74 -3.56 -6.13 -1.35 -0.45 15.21 -3.95 1.874
30/4/2016 28.02 1.8 -0.12 -1.15 -0.8 -3.62 2.89 2.471
31/5/2016 0.31 3.92 3.19 1 1.48 -2.9 5.26 2.13
30/6/2016 0.42 1.02 -0.8 1.15 4.77 13.76 7.37 1.64
31/7/2016 -
0.03 3.88 7.74 1.91 -1.82 18.83 5.45 -1.044
31/8/2016 33.55 -2.65 -0.4 0.19 4.17 -5.07 -3.41 1.193
30/9/2016 0 -0.2 -2 0.29 -1.93 17.38 -0.45 -1.044
31/10/2016 -
-0.92 -3.47 -8.14 -1.86 -5.65 -5.79 13.18 -3.355
30/11/2016 32.21 2.65 6.14 2.06 1.79 1.45 0.23 1.193
31/12/2016 0.03 1.43 6.01 -1.29 0 0 -2.95 -0.82
31/1/2017 0.1 4.49 10.55 0.62 0.89 18.83 2.73 -0.447
31/3/2017 -0.05 -0.06 0.8 -0.19 2.53 5.07 1.59 1.789
30/4/2017 -
1.01 0.41 4.87 1.69 2.23 11.59 -2.05 -0.149
31/5/2017 0.5 0.12 -0.51 0.28 -0.89 -7.97 3.86 1.267
30/6/2017 37.78 2 2.95 1.64 -1.64 0 5.45 1.193
31/7/2017 38.97 -0.18 -1.67 -1.08 -0.15 -0.7 -1 -0.075
31/8/2017 0.1 0.12 -1.28 0.66 0.21 -2.81 -1.8 -0.075
30/9/2017 0.21 0.23 -0.77 1.22 -1.06 -5.27 -2.6 -4.921
31/10/2017 0.3 1.06 -0.51 150 -4.04 -8.78 -0.2 0.596
30/11/2017 1.38 4.23 9.87 300 1.28 -7.73 3.6 2.162
31/12/2017 0.19 -1.17 1.03 75 0.53 10.19 -1 -3.355
5
Past Loser Return During 2007 – 2017 (120 Month Period)
AALI ADRO BBCA BUMI INTP ASII ANTM

31/1/2007 5.01 220 1.82 12 9 -0.33 1.46
28/2/2007 12.29 -25 -1.3 11 -9 -0.4 2.85
31/3/2007 22.58 -290 4.35 7 10 0.8 4.09
30/4/2007 10.15 -530 0.43 32 0 1.1 -1.74
31/5/2007 -2.07 -130 0 40 14 0.33 -0.95
30/6/2007 6.42 -90 3.48 50 4 1.23 0.73
31/7/2007 -
13.55 190 1.82 -9.85 -3.33 -0.14 -0.9
31/8/2007 -8.02 140 -0.45 29.55 -10 0.47 1.42
30/9/2007 27.58 -10 0.45 37.88 65 2.17 1.55
31/10/2007 -
0 160 1.36 18.18 -30 -0.34 3.22
30/11/2007 -2.51 120 -2.96 7.58 16.67 1.44 -0.58
31/12/2007 4.49 70 -0.91 12.12 -15 -0.03 -2.39
31/1/2008 5.58 80 8.66 19.7 -8.33 0.22 1.16
29/2/2008 - - -
10.52 80 -1.97 39.39 13.33 -2.03 -1.55
31/3/2008 -
-8 -180 -3.15 13.64 48.33 -2.66 0.39
30/4/2008 -5.03 280 -0.79 42.42 18.33 0.63 -0.71
31/5/2008 - -
11.43 130 3.94 3.03 23.33 -1.34 -0.13
30/6/2008 17.55 150 7.09 -50 25 1.97 -1.87
31/7/2008 -
13.79 40 162.5 -30.3 7.5 -0.26 -94.08
31/8/2008 - - - -
10.78 -25 137.5 46.67 11.25 -0.81 -1.56
30/9/2008 - -
23.32 10.29 -125 22.78 -62.5 -1.6 -1.4
31/10/2008 -
5.52 11.76 -125 25.67 -5 -0.06 -0.27
30/11/2008 11.04 2.94 0 -2.44 28.75 0.35 0.39
6
31/12/2008 -1.23 9.12 -1.82 -8.89 -2.5 0.82 -0.12
31/1/2009 5.23 -8.82 -2.14 6 -8.13 -0.48 0.47
28/2/2009 4.61 3.24 5.71 1.33 27.5 1.13 -0.27
31/3/2009 -0.92 5.83 -7.14 10.44 10 1.13 1.29
30/4/2009 14.45 -10.42 7.14 9.78 21.25 1.03 2.38
31/5/2009 11.07 14.58 11.43 -3.11 20 0.62 0.1
30/6/2009 -4.49 10 5 20.44 43.75 1.85 0.59
31/7/2009 5.44 -1.67 2.86 1.11 2.33 -0.04 -0.37
31/8/2009 3.4 2.44 -2.86 7.91 7 0.48 2.92
30/9/2009 -
3.4 -6.83 5 14.82 1.67 -0.39 -2.92
31/10/2009 5.45 -3.9 22.86 2.96 0.67 0.23 -0.73
30/11/2009 -
3 20.24 11.43 1.98 16.33 0.72 -1.46
31/12/2009 -
7.02 -13.17 11.81 0.99 -2.33 0.22 -2.56
31/1/2010 -4.51 -31.71 0 -5.93 4.33 0.29 0
28/2/2010 -
7.58 7.32 14.29 1.48 4.67 1.74 4.38
31/3/2010 1.23 2.54 0 1.48 7.67 0.91 0.73
30/4/2010 0.51 22.84 9.29 -6.92 -9 -1.12 -5.12
31/5/2010 2.05 -7.61 -2.14 -0.59 6 1.91 0.44
30/6/2010 2.15 -22.84 3.57 1.19 6.67 1.1 2.92
31/7/2010 -
11.99 5.08 18.57 -1.38 5.11 -0.28 -1.65
31/8/2010 -
15.98 8510.64 1.43 15.35 0.44 0.88 9.1
30/9/2010 4.3 39716.31 0 0 -2.44 -0.31 3.31
31/10/2010 7.07 -4255.32 20 14.45 -7.11 -0.67 -7.45
30/11/2010 7.99 -15602.84 0.71 6.32 -3.33 0.45 0
31/12/2010 - -
-2.22 15602.84 -1.43 14.45 11.11 -1.17 -9.93
7
31/1/2011 4.13 -19858.16 1.43 4.52 0.89 0.73 -2.48
28/2/2011 6.18 -14184.4 0 13.55 8.22 0.64 0.83
31/3/2011 -3.8 3.28 10.71 3.61 1.78 -0.37 -1.65
30/4/2011 -2.98 0 -6.43 -5.42 -0.89 0.45 -4.14
31/5/2011 -
0.37 -4.68 -7.86 14.45 1.11 0.95 -2.48
30/6/2011 -0.22 1.41 7.14 1.81 -8.22 1.05 -3.31
31/7/2011 -
-2.01 2.34 12.94 21.68 -1.14 -0.49 -1.72
31/8/2011 - -
1.25 111111.11 -9.41 13.76 -5.7 -0.37 -4.63
30/9/2011 2.26 -23809.52 7.06 13.4 13.88 0.89 4.51
31/10/2011 -3.01 95238.1 11.76 -3.59 -0.95 0.39 -0.59
30/11/2011 -
25.58 95238.1 15.29 4.19 7.79 0.52 -0.24
31/12/2011 -
7.72 -15873.02 18.82 7.78 -0.76 0.87 3.09
31/1/2012 -
18.03 182539.68 -4.29 -2.99 1.71 -1.14 0.95
29/2/2012 -
-1.58 119047.62 7.14 -1.2 3.8 0.72 -1.54
31/3/2012 0.48 -63636.36 5 -8.98 -1.33 -0.7 -1.66
30/4/2012 -
-0.96 245454.55 -0.71 0 -1.52 -1.24 -6.89
31/5/2012 3.7 -72727.27 -2.86 -7.18 0.38 0.86 2.02
30/6/2012 -
-0.48 227272.73 9.29 -2.87 12.74 0.17 -0.95
31/7/2012 -2.38 -63636.36 4.6 -8.62 -1.88 -0.25 -0.09
31/8/2012 -
-6.35 -36363.64 22.99 -0.7 0.85 0.36 0.92
30/9/2012 3.81 -36363.64 -1.15 -4.89 4.78 0.54 -0.55
31/10/2012 6.19 -63636.36 8.05 -4.89 3.75 -0.47 -0.46
30/11/2012 -3.65 -22727.27 -9.2 2.1 -1.54 35 0.09
8
31/12/2012 15.78 -13636.36 0 5.59 -3.07 -20 0.74
31/1/2013 25.01 118181.82 -1.11 10.48 1.54 83.33 -0.92
28/2/2013 -
-1.47 18181.82 -8.45 -9.08 2.05 33.33 0.65
31/3/2013 -
-0.52 -76000 9.86 -2.1 10.58 83.33 -0.09
30/4/2013 8.27 32000 12.68 -0.7 -8.7 -50 -0.92
31/5/2013 -
-6.6 160000 19.01 -7.69 2.39 -8.33 -2.49
30/6/2013 -
2.51 0 6.34 -2.8 12.12 -2.67 1.48
31/7/2013 8.29 28000 -4.93 -7.69 -3.33 -3 2.68
31/8/2013 -3.86 0.54 -8.05 3.14 -1.78 2.33 1.78
30/9/2013 0 -2.16 -5.75 -0.35 6.44 2 3.03
31/10/2013 -
-4.51 -2.7 16.09 11.18 -3.67 -2.67 -5.89
30/11/2013 -1.61 4.32 26.44 0.35 2.89 7.81 -3.03
31/12/2013 1.85 -3.24 10.34 0.49 5.33 -5.86 -1.07
31/1/2014 0.59 0.27 -1 1.26 2.33 8.59 0.36
28/2/2014 1.08 -9.18 0.33 -4.05 3.06 8.2 1.69
31/3/2014 -6.85 -6.48 0.33 -4.61 -3.44 -1.17 0.71
30/4/2014 -
-3.22 159574.47 18.33 -0.28 1.56 -5.47 0.45
31/5/2014 -
-1.61 265957.45 -5.33 -2.59 -0.78 0.78 -1.52
30/6/2014 -
3.49 106382.98 8 0.98 4.33 2.47 3.03
31/7/2014 - -
12.36 425531.91 -2 0.42 -0.78 -0.99 -6.51
31/8/2014 16.97 0 -3 -0.42 -2.86 -3.78 -4.34
30/9/2014 8.79 91269.84 6.67 -3.63 2.58 -1.48 -9.99
31/10/2014 23.97 -59523.81 8.89 -3.07 0.78 1.64 3.04
30/11/2014 87301.59 7.22 -0.49 0.36 5.08 8.25
-
9
21.59
31/12/2014 -3.03 43650.79 7.22 1.47 -2.22 6.64 0
31/1/2015 -5.96 87301.59 10.91 -0.7 1.56 0.78 -4.78
28/2/2015 3.33 142857.14 -4.34 -0.84 -2.36 11.33 -12.16
31/3/2015 -
1.26 111111.11 6.12 0.14 -1.06 26.95 -5.65
30/4/2015 -5.96 -0.65 -5.87 0.42 1.56 7.03 -3.04
31/5/2015 -6.11 6.87 -0.26 -1.33 -1.58 -3.52 -8.25
30/6/2015 -3.74 2.29 -5.1 -0.7 -0.94 -3.13 -17.81
31/7/2015 8.98 4.58 -5.1 0 -0.3 -3.62 1.74
31/8/2015 -
15.43 35.22 6.63 0 -2.15 -4.44 -5.06
30/9/2015 -2.73 9.55 -28 0 1.04 4.28 -16.88
31/10/2015 4.1 -9.55 13.5 0 0.37 0.66 -29.15
30/11/2015 -3.91 -0.6 15 0 2.09 -0.78 -1.51
31/12/2015 -0.76 0 5 0 -1.94 7.03 7.54
31/1/2016 13.13 0 11.43 0 0.24 4.69 15.08
29/2/2016 -
3.54 11.04 11.43 0 -0.13 6.64 49.25
31/3/2016 -3.34 2.34 -4.05 0 -0.13 -9.77 149.25
30/4/2016 3.6 -9.95 8.1 0 -2.11 -2.73 -60.3
31/5/2016 -0.42 -0.2 6.43 1.19 0.09 6.86 37.69
30/6/2016 3.18 2.73 10.24 0 0.13 2.43 35.18
31/7/2016 -3.74 -0.39 2.14 0 0.48 2.21 -42.71
31/8/2016 -4.24 3.44 -0.95 0 -0.48 1.33 50.25
30/9/2016 6.46 1.18 -4.55 10.2 -3.25 -1.77 32.66
31/10/2016 -
-4.75 -7.46 -3.18 5.31 -1.14 12.73 37.69
30/11/2016 2.47 -5.68 6.82 -0.84 -1.39 11.36 -35.18
31/12/2016 -
25.76 -2.6 -3.64 15.37 -0.9 -5.91 -47.74
10
31/1/2017 - -
16.41 19.38 12.72 0.06 3.64 -32.66
31/3/2017 0.01 1.35 7.83 0.36 4.55 -20.1
30/4/2017 -0.04 5.19 -4.47 3.73 -3.64 40.2
31/5/2017 0.03 0.29 -3.07 -0.12 3.18 -40.2
30/6/2017 0.54 1.15 -1.26 -2.65 -8.63 -7.54
31/7/2017 -0.14 3.85 -8.53 2.48 -0.88 20.1
31/8/2017 -5.05 -2.31 -2.03 -0.97 0.22 -50.25
30/9/2017 -3.03 16.77 4.19 3.66 0.88 2.51
31/10/2017 -8.33 16.43 2.8 -3.85 -0.22 5.03
30/11/2017 -10.1 -0.71 -2.1 3.79 5.91 -20.1
31/12/2017 -2.86 3.77 -0.16 3.64 145.73
11
Cumulative Average Return Table Portfolio Formation Period 1
Winner 1 Loser 1AVERAGE CAR W,n,t CAR L,n,t S2t Tt

31/1/2007 24.77 -0.27 11.37 179.56 23959.94 168976.53 158.43
28/2/2007 -1.91 1.5 4.37 39.44 1709.69 12243.90 41.34
31/3/2007 -25.34 2.3 7.23 1060.80 1179710.74 8265400.84 1122.75
30/4/2007 -57.06 -0.19 2.68 3568.87 13147350.96 92056438.80 3751.66
31/5/2007 -2.87 -0.65 1.47 18.84 471.13 3429.78 21.15
30/6/2007 -3.58 3.55 2.24 33.87 1402.68 10055.88 37.38
31/7/2007 18.53 0.25 8.6 98.60 6411.99 45574.16 80.99
31/8/2007 20.11 1.1 6.85 175.83 24247.97 170966.59 159.44
30/9/2007 18.28 2.14 0.07 331.60 98171.99 689525.17 322.68
31/10/2007 17.19 -0.72 7.15 100.80 6990.90 49641.91 84.69
30/11/2007 18.4 -0.4 4.51 192.93 30461.45 214580.70 178.95
31/12/2007 11.52 -3.67 2.78 76.39 4207.81 29989.35 65.34
31/1/2008 12.82 1.83 2.07 115.56 10556.02 74701.09 104.61
29/2/2008 -4.64 -0.83 2.72 54.17 3458.57 24589.17 59.46
31/3/2008 -29.04 -3.8 2.1 969.70 997480.79 6989153.42 1032.29
30/4/2008 48.62 -0.82 6.46 1777.47 2988907.11 20934792.02 1787.93
31/5/2008 6.89 0.39 0.25 44.09 1383.81 9995.30 36.70
30/6/2008 16.65 1.5 5.73 119.25 10526.02 74516.87 104.40
31/7/2008 3.41 -42.95 8.12 22.18 352.47 2622.56 17.66
31/8/2008 -13.74 -23.92 5.01 351.56 133445.92 936582.35 376.63
30/9/2008 -16.91 -23.82 -0.45 270.93 82852.79 581866.03 296.49
31/10/2008 -2.1 -21.17 0.41 6.30 70.56 538.03 7.59
30/11/2008 5.59 0.82 4.24 1.82 14.19 112.12 3.20
31/12/2008 -0.16 -1.25 -2.78 6.86 49.34 393.45 5.86
31/1/2009 -1.28 -1.24 7.72 81.00 6770.00 47956.99 83.65
28/2/2009 5.19 2.17 12.34 51.12 2109.79 15126.42 45.84
31/3/2009 6.42 0.55 12.42 36.00 874.98 6376.83 28.77
12
Winner 1 Loser 1AVERAGE CAR W,n,t CAR L,n,t S2t Tt
30/4/2009 7 1.88 -2 81.00 5476.00 38899.00 74.91
31/5/2009 6.11 2.32 7.46 1.82 18.38 141.44 3.81
30/6/2009 11.13 1.75 1.87 85.75 5567.79 39574.74 75.47
31/7/2009 1.92 -0.44 12.51 112.15 12150.23 85836.67 112.53
31/8/2009 8.05 0.72 -1.74 95.84 7707.80 54625.54 89.19
30/9/2009 -5.92 -0.75 4.34 105.27 12362.68 87275.65 113.63
31/10/2009 3.23 3.27 9.56 40.07 1357.10 9780.21 36.47
30/11/2009 6.2 -1.85 -0.85 49.70 1892.47 13595.19 43.28
31/12/2009 -2.21 -1.12 -2.13 0.01 4.91 34.43 2.29
31/1/2010 -4.59 0.21 1.14 32.83 1400.47 10033.14 37.39
28/2/2010 9.17 -0.9 -0.04 84.82 5723.54 40658.57 76.58
31/3/2010 6.22 1 -0.15 40.58 1180.40 8546.81 33.76
30/4/2010 0.03 -1.27 4.35 18.66 347.17 2560.80 17.78
31/5/2010 0.32 0.59 0.89 0.32 0.00 2.27 -0.59
30/6/2010 9.86 1.56 6.59 10.69 0.69 79.71 -3.07
31/7/2010 0.65 2.37 0.87 0.05 0.36 2.87 0.51
31/8/2010 1261414546548.0 8829909695191. 1162545.4
1066.55 4.22 6.27 1124193.68 3 96 7
30/9/2010 606010110577812 42420709464003 25481296.
4965.32 2.03 3.24 24622237.93 .00 50.00 43
31/10/2010 570810249804.7
-531.31 0.03 2.57 285027.85 81544036372.83 6 295580.27
30/11/2010 14513346635192. 10159345310017 3943349.0
-1949.88 -1.03 1.45 3807688.77 60 0.00 9
31/12/2010 14555031982112. 10188525059421 3949008.0
1955.15 -2.54 1.42 3817060.91 80 6.00 8
31/1/2011 38132741697109. 26692923508860 6391908.1
-2480.83 0.98 3.66 6172690.56 60 1.00 0
13
Winner 2 Loser 2 AVERAGE CAR W,n,t CAR L,n,t S2t Tt

28/2/2011
-0.26 -1.76 -4.86 21.16 458.82 3359.83 20.68
31/3/2011
-5.64 -1.25 1.98 58.06 4058.25 28814.20 64.54
30/4/2011
-2.51 0.94 2.93 29.59 1030.64 7421.64 31.82
31/5/2011
0.7 -1.23 -6.57 52.85 2719.92 19409.45 52.43
30/6/2011
-0.06 -0.78 -0.24 0.03 0.01 0.29 -0.12
31/7/2011
-0.88 -2.05 3.76 21.53 502.19 3666.04 21.74
31/8/2011
3.28 3.18 2.21 1.14 4.56 39.92 1.48
30/9/2011
3.97 6.65 -1.76 32.83 833.07 6061.30 28.15
31/10/2011
-9.07 -9.23 0.78 97.02 11255.62 79468.49 108.40
30/11/2011
0.99 0.12 -6.95 63.04 3850.65 27395.85 62.67
31/12/2011
0.43 -2.88 -4.17 21.16 429.73 3156.25 19.92
31/1/2012
-0.99 -5.13 8.12 82.99 7052.99 49951.90 85.41
29/2/2012
-1.43 1419 1.68 9.67 123.26 930.50 10.20
31/3/2012
-0.84 6615.88 3.25 16.73 308.64 2277.56 16.75
30/4/2012
-3.61 -708.06 -2.9 0.50 16.93 122.01 4.07
31/5/2012
3.49 -2591.75 7.77 18.32 219.88 1667.40 13.52
30/6/2012
-2.75 2596.3 5.92 75.17 6071.35 43025.67 79.17
31/7/2012
0.7 -3307.03 6.64 35.28 1196.03 8619.16 34.24
31/8/2012
0.92 -2358.12 0.45 0.22 0.49 4.97 0.33
30/9/2012
-1.64 -2.96 2.28 15.37 289.22 2132.09 16.24
31/10/2012
-0.22 -1.44 0.83 1.10 1.75 19.96 0.40
30/11/2012
1.87 4.06 0.04 3.35 2.19 38.75 -0.51
31/12/2012
-0.74 4.32 1.61 5.52 39.22 313.19 5.21
31/1/2013
-3.55 -5.99 5.43 80.64 7088.02 50180.65 85.67
28/2/2013
-7.21 -18504.61 5.3 156.50 26801.00 188702.48 167.98
31/3/2013
-0.22 -3972.8 0.66 0.77 0.99 12.34 0.17
30/4/2013
-47.08 15858.9 5.62 2777.29 7977065.90 55858902.31 2921.97
31/5/2013
-39.62 15865.44 7.1 2182.76 4938965.75 34588039.58 2298.86
30/6/2013
-38.41 -2642.14 1.1 1561.04 2558240.62 17918611.64 1654.07
31/7/2013
-53.14 30417.78 8.23 3766.28 14587945.46 102141982.13 3951.94
31/8/2013
4.83 -19834.56 5.99 1.35 12.14 94.41 3.04
30/9/2013
-2.32 -10607.08 1.92 17.98 411.99 3009.79 19.67
31/10/2013
-5.61 -40907.71 4.33 98.80 10902.20 77007.02 106.62
30/11/2013
4.42 -12112.4 6.33 3.65 0.60 29.71 -1.53
31/12/2013
2.74 -37874.37 3.37 0.40 5.49 41.21 2.17
31/1/2014
-4.59 -10606.65 -1.32 10.69 233.57 1709.82 14.76
14
28/2/2014
-2.98 -6060.53 -4.77 3.20 38.24 290.13 5.63
31/3/2014
-1.71 -6059.58 24.03 662.55 441238.16 3093304.95 686.02
30/4/2014
0.69 -10601.74 1.31 0.38 0.09 3.34 -0.44
31/5/2014
-0.69 -3787.81 -0.88 0.04 0.53 3.94 0.68
30/6/2014
0.23 -2269.11 -4.59 23.23 529.11 3866.40 22.28
31/7/2014
-2.91 19692.37 -4.11 1.44 18.92 142.54 4.01
31/8/2014
0.05 3029.81 1.21 1.35 1.68 21.17 0.20
30/9/2014
0.69 -12664.9 4.11 11.70 121.14 929.86 9.83
31/10/2014
-1.27 5336.24 -1.61 0.12 1.92 14.25 1.31
30/11/2014
-0.35 26667.75 9.3 93.12 8737.11 61811.62 95.22
31/12/2014
-0.13 0.31 3.17 10.89 121.44 926.31 9.95
15

31/1/2015
0.95 -1.15 -4.59 30.69 884.56 6406.78 29.21
28/2/2015
-1.77 2.26 5.8 57.30 3489.84 24830.04 59.66
31/3/2015
-0.4 0.64 0.19 0.35 0.56 6.35 0.23
30/4/2015
-0.73 -2.5 4.04 22.75 551.45 4019.40 22.84
31/5/2015
-1.05 4.84 3.5 20.70 473.17 3457.12 21.07
30/6/2015
-2.58 3.93 3.65 38.81 1713.37 12265.30 41.41
31/7/2015
-0.17 2.74 3 10.05 104.43 801.32 9.13
31/8/2015
-0.18 2.72 8.59 76.91 5943.32 42141.60 78.26
30/9/2015
-6.76 -4.31 -0.58 38.19 2020.72 14412.37 45.23
31/10/2015
-1.46 0.94 5.44 47.61 2407.86 17188.32 49.30
30/11/2015
2.16 -2.72 1.36 0.64 2.31 20.65 1.01
31/12/2015
1.72 -0.82 0.27 2.10 0.15 15.74 -1.35
31/1/2016
2.65 -1.9 0.07 6.66 16.05 158.95 2.04
29/2/2016
5.23 -0.23 1.34 15.13 98.05 792.29 8.07
31/3/2016
18.31 1.56 3.54 218.15 39937.18 281087.36 205.17
30/4/2016
-6.95 2.7 4.01 120.12 16147.19 113871.19 130.07
31/5/2016
5.14 -4.11 0.37 22.75 310.21 2330.77 16.31
30/6/2016
4.95 -2.34 28.22 541.49 287878.28 2018938.44 553.81
31/7/2016
-5.23 -2.69 27.58 1076.50 1170131.36 8198454.96 1118.15
31/8/2016
6.23 1.18 18.82 158.51 23188.62 163429.89 156.01
30/9/2016
3.42 2.39 29.01 654.85 424358.57 2975093.92 672.73
31/10/2016
4.24 -0.73 -1.6 34.11 891.95 6482.42 29.18
30/11/2016
-3.41 1.41 1.28 22.00 645.47 4672.26 24.98
31/12/2016
-6.5 -1.02 0.01 42.38 2389.26 17021.51 49.26
31/1/2017
-1.14 -0.26 -2.16 1.04 4.75 40.56 1.60
31/3/2017
-2.36 -0.86 -1.29 1.14 12.28 94.00 3.15
30/4/2017
4.94 0 0.66 18.32 178.98 1381.10 11.84
31/5/2017
-5.51 -1.94 2.83 69.56 5634.84 39930.80 76.27
30/6/2017
-0.97 -0.09 2.19 9.99 120.03 910.08 9.99
31/7/2017
2.39 -0.99 1.13 1.59 0.64 15.62 -0.65
31/8/2017
-6.78 -1.86 2.84 92.54 9865.34 69705.17 101.37
30/9/2017
0.58 0.66 4.55 15.76 230.46 1723.54 14.16
31/10/2017
3.05 -2.36 -1.78 23.33 411.23 3041.94 19.26
30/11/2017
-0.27 2.36 5.15 29.38 878.91 6358.00 29.18
31/12/2017
18.12 -6.58 -0.82 358.72 116010.81 814586.75 350.93
16

Reversals in Emerging Market-Will Momentum Strategy Be Profitable in Indonesia's Stock Market? (Agista Saraswati) PDF

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Reversals in Emerging Market-Will Momentum Strategy Be Profitable in Indonesia's Stock Market? (Agista Saraswati) PDF

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Student ID Number: 170379269

Name and Surname: Agista Rully Saraswati

MSc Programme: MSc Behavioural Finance

Title: Reversals in Emerging Market: Will Momentum Strategy Be Profitable in

Name of Supervisor: Prof. Theodore Panagiotidis

I do agree to allow my dissertation to be seen by future students

Online Dissertation submission:

Keywords: Momentum Strategy, Behavioural Finance, Efficient Market Hypothesis, LQ-45,

According to the explanation above: 1) there was a connection between momentum

In addition, Fama argued on Efficient Capital Markets: A Review of Theory and

B. The Implication of Momentum Strategy

A momentum strategy is a method that involved categorization between winner and

Price adjustment usually worked as a seasonality of price correction. According to

A financial market is assumed as random walk and unpredictable according to

By applying the momentum strategy to form a portfolio, rational investors consider

A momentum strategy-based portfolio has a suggestive probability of changing

Whilst momentum strategy is effectively applied by the investors, the volume of

Table 1. Sampling criterions to determine the final sample of the study

Number Sampling Criteria Number of

𝑇" = [ACAR 2," – ACAR +," ]/D2S"# /𝑁 (2)

Forming Portfolio Period 1 (2007-2010)

Rit = Return of stock i at time t

Pit = Price of stock i at time t

Pit-1 = Price of stock i at time t-1

No. Past Winner Average Past Loser Average

1. BBRI 1.71 BDMN 0.13

2. BBNI 3.65 ISAT -0.26

3. INDF 2.47 TLKM -0.16

4. AALI 2.15 BBCA -9.55

5. ADRO 500.30 ASII 0.25

6. BUMI 2.54 ANTM -1.99

7. INTP 2.02 BMRI 0.73

source: modified data from Yahoo Finance

Forming Portfolio Period 2 (2011-2014)

Table 3. Past Winner and Past Loser Formation Period 1 (2011-2014)

No. Past Winner Average Past Loser Average

1. BBRI 7.00 BDMN -0.33

2. BMRI 1.18 ISAT -0.47

3. KLBF 2.11 BBNI 0.51

4. TLKM 1.07 INDF 0.47

5. BBCA 2.03 ASII -1.17

10. INTP 0.86

Forming Portfolio Period 4 (2015-2017)

No. Past Winner Average Past Loser Average

1. BBRI 6.81 BDMN 0.73

2. BMRI 15.72 TLKM 0.27

3. ANTM 4.82 BBNI 0.24

4. ISAT 1.68 INDF -0.13

5. BBCA 2.41 ASII 0.00

6. ADRO 14221.33 AALI -2.33

source: modified data from Yahoo Finance

source: modified data

In addition, this study unable to justify significant momentum strategy as profitable

The momentum strategy is difficult to detect in an emerging market because it has

According to Daniel and Moskowitz (2013) momentum strategy volatility is actually

The behavioural explanation that momentum strategy is implausible in Indonesia

Past Winner Return During 2007 to 2017 (120 month)

BBRI BBNI BDMN BMRI INDF ISAT KLBF TLKM

AALI ADRO BBCA BUMI INTP ASII ANTM

Winner 1 Loser 1AVERAGE CAR W,n,t CAR L,n,t S2t Tt

Winner 2 Loser 2 AVERAGE CAR W,n,t CAR L,n,t S2t Tt