Graham & Dodd theory in stock portfolio performance in LQ 45 index at Indonesia stock exchange

https://doi.org/10.21744/irjmis.v5n6.338

Authors

  • AA Sagung Istri Pramanaswari Udayana University, Faculty of Economics, Denpasar, Indonesia
  • Gerianta Wirawan Yasa Udayana University, Faculty of Economics, Denpasar, Indonesia

Keywords:

CAPM, Graham & Dodd theory, Overvalued stock, Stock portfolio performance, Undervalued stocks

Abstract

The measurement of the performance of the overvalued stock portfolio and undervalued stock portfolio aims to find out whether its performance is in accordance with Graham & Dodd's Theory. This study uses the Capital Asset Pricing Model (CAPM) in forming a portfolio in the Indonesia Stock Exchange LQ45 Index (IDX). In evaluating the performance of the stock portfolio, the method applied in the research is Sharpe index due to the fact that it meets the international performance measurement standards. The results of different tests of performance obtained are expected to become guidelines for investors in determining the investment portfolio stock strategy. The population of this study is all shares listed on the IDX LQ45 Index for the period February 2016-July 2016. The sample selection was done by purposive sampling method through determining 8 stocks classified as overvalued and 8 stocks classified as undervalued. The statistical method used is the data analysis technique in the form of the Wilcoxon test. The results showed that there was a decrease in the performance of the overvalued stock portfolio after 6 months and 12 months and there was an increase in the performance of the undervalued stock portfolio after 6 months and 12 months.

Downloads

Download data is not yet available.

References

Basu, S. (1977). Investment performance of common stocks in relation to their price‐earnings ratios: A test of the efficient market hypothesis. The journal of Finance, 32(3), 663-682. https://doi.org/10.1111/j.1540-6261.1977.tb01979.x

Bodie, Z., Kane, A., & Marcus, A. J. (2011). Investment and portfolio management. McGraw-Hill Irwin. https://www3.business.uiuc.edu/FSDB2/CourseSyllabi/15060/120148/1003021/N/15060_120148_1003021_N.pdf

Chopra, N., Lakonishok, J., & Ritter, J. R. (1992). Measuring abnormal performance: do stocks overreact?. Journal of financial Economics, 31(2), 235-268. https://doi.org/10.1016/0304-405X(92)90005-I

Dewi, I. G. A. A. O., & Dewi, I. G. A. A. P. (2017). Corporate social responsibility, green banking, and going concern on banking company in Indonesia stock exchange. International Journal of Social Sciences and Humanities, 1(3), 118-134. https://doi.org/10.29332/ijssh.v1n3.65

Fama, E. F., & French, K. R. (1992). The cross‐section of expected stock returns. the Journal of Finance, 47(2), 427-465. https://doi.org/10.1111/j.1540-6261.1992.tb04398.x

Graham, B., & Dodd, D. (2008). Security Analysis: Foreword by Warren Buffett. McGraw-Hill Professional.

IDX. Website Resmi Bursa Efek Indonesia (Indonesia Stock Exchange). Available at: www.idx.co.id.

Knopers, F. E. J. (2014). Value Investing: Evidence from the Dutch Stock Market (Master's thesis, University of Twente). https://essay.utwente.nl/65834/1/knopers_MA_mb.pdf

Markowitz, H. (1952). Portfolio selection. The journal of finance, 7(1), 77-91. https://doi.org/10.1111/j.1540-6261.1952.tb01525.x

Nam, K., Pyun, C. S., & Avard, S. L. (2001). Asymmetric reverting behavior of short-horizon stock returns: An evidence of stock market overreaction. Journal of Banking & Finance, 25(4), 807-824. https://doi.org/10.1016/S0378-4266(00)00110-2

Sugiyono. (2013). Metode Penelitian Bisnis (Pendekatan Kuantitatif, Kualitatif, dan R&D). Bandung: Alfabeta

Tandelilin, E. (2010). Portofolio dan Investasi teori dan aplikasi. Yogyakarta: Kanisius, 8-9.

Wardjono, W. (2010). Analisis Faktor-Faktor yang Mempengaruhi Price to Book Value dan Implikasinya pada Return Saham (Studi Kasus pada Perusahaan Manufaktur yang Terdaftar di BEI). Dinamika Keuangan Dan Perbankan, 2(1). https://www.unisbank.ac.id/ojs/index.php/fe1/article/view/184

Wiagustini, N. L. P. (2009). Profitabilitas strategi investasi kontrarian di Bursa Efek Indonesia. Jurnal Manajemen dan Kewirausahaan, 10(2), 105-114. http://ced.petra.ac.id/index.php/man/article/view/17037

Wiagustini, N. L. P. (2010). Dasar-Dasar Manajemen Keuangan. Edisi Pertama. Denpasar: Udayana University.

Published

2018-11-02

How to Cite

Pramanaswari, A. S. I., & Yasa, G. W. (2018). Graham & Dodd theory in stock portfolio performance in LQ 45 index at Indonesia stock exchange. International Research Journal of Management, IT and Social Sciences, 5(6), 52–59. https://doi.org/10.21744/irjmis.v5n6.338

Issue

Vol. 5 No. 6 (2018): November

Section

Peer Review Articles
Copyright & Licensing

Articles published in the International Research Journal of Management, IT and Social sciences (IRJMIS) are available under Creative Commons Attribution Non-Commercial No Derivatives Licence (CC BY-NC-ND 4.0). Authors retain copyright in their work and grant IRJMIS right of first publication under CC BY-NC-ND 4.0. Users have the right to read, download, copy, distribute, print, search, or link to the full texts of articles in this journal, and to use them for any other lawful purpose.

Articles published in IRJMIS can be copied, communicated and shared in their published form for non-commercial purposes provided full attribution is given to the author and the journal. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial publication in this journal.

This copyright notice applies to articles published in IRJMIS volumes 7 onwards. Please read about the copyright notices for previous volumes under Journal History.