An Empirical Study of Cross-Sectional Stock Returns of Banks Listed on the Indonesia Stock Exchange: Testing Market Beta, Market Return, Market-based and Bank-Specific Characteristics (2020-2024)

About Us

Ipmi Repository is an online archive service which is managed by IPMI Library - Learning Resource Center. Established for collecting, managing, saving, preserving and disseminating digital copies of intellectual output of IPMI International Business School such as academic journal, books, theses, Group Field Project, Community Involvement Project, Case Study, conference paper, and other types of research publication. The main objective of this repository is to provide long-term, public, open access and easily retrieve to the digital collection to support teaching-learning process.

"Knowledge without observation is nil"

Worang, George C (2026) An Empirical Study of Cross-Sectional Stock Returns of Banks Listed on the Indonesia Stock Exchange: Testing Market Beta, Market Return, Market-based and Bank-Specific Characteristics (2020-2024). Undergraduate thesis, IPMI Institut.

[img] Text
George C. Worang.pdf
Download (7MB)

Abstract

This study examines the determinants of cross-sectional variation in quarterly stock returns of banks listed on the Indonesia Stock Exchange during the 2020-2024 period. Grounded in Modern Portfolio Theory, the Capital Asset Pricing Model (CAPM), and multi-factor asset pricing literature, the research investigates whether Market Beta (β), Market Return (Rm), market-based characteristics, and bank specific fundamentals are associated with differences in quarterly returns across banks. The study employs a bank-quarter panel dataset covering 2020Q1-2024Q4. Quarterly stock return, calculated from end-of-quarter closing prices, serves as the dependent variable. The independent variables include Market Beta derived from a 36-month rolling window of monthly returns and mapped to quarter-end, Market Return (Rm), Firm Size (market capitalization), Book-to-Market (B/M), and key banking ratios: Capital Adequacy Ratio (CAR), Non-Performing Loans (NPL), Net Interest Margin (NIM), and Loan-to-Deposit Ratio (LDR). Panel regression analysis is applied, with model selection based on the Chow test, Hausman test, and Breusch-Pagan Lagrange Multiplier test. The results indicate that Market Return (Rm) is positively and statistically significantly associated with quarterly stock returns, whereas Market Beta (β) is not statistically significant within the study period. In the extended specification, CAR, NPL, NIM, and LDR are statistically significant with negative coefficients, while Firm Size and Book-to-Market do not show statistical significance at the 5% level. The model is jointly significant and explains approximately 26,16 of the variation in quarterly stock returns. Overall, the findings suggest that, during 2020-2024 and within the sample of Indonesian banks, cross-sectional differences in quarterly returns are more closely associated with market conditions and selected bank fundamentals than with variation in beta across banks. Keywords: stock return, market beta, market return, market-based characteristics, bank-specific characteristics

Item Type: Thesis (Undergraduate)
Subjects: H Social Sciences > H Social Sciences (General)
Divisions: Thesis > Bachelor of Business Administration
Depositing User: sandra margaretha
Date Deposited: 06 Mar 2026 04:51
Last Modified: 06 Mar 2026 04:51
URI: http://repository.ipmi.ac.id/id/eprint/2958

Actions (login required)

View Item View Item