Idiosyncratic Risk on Stock Performance in Indonesia Stock Exchange

Abstract

In this paper, we present the relation between idiosyncratic risk and Indonesia's stock performance using asset pricing models. We use a unique data set containing daily returns of 80 Indonesia equity of KOMPAS100 index on a 7-year period to measure stock performance. We formed portfolios based on market capitalization and book to market value. We found that idiosyncratic risk positively correlates with the excess stock return, specifically in the portfolio of secondtier Size and portfolio with highest and lowest book to market value.