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Is Indonesia's stock market different when it comes to predictability?
journal contribution
posted on 2019-09-01, 00:00 authored by Susan SharmaSusan Sharma, Paresh Narayan, Kannan ThuraisamyKannan Thuraisamy, N LailaWe 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 reviewVolume
40Article number
100623Pagination
1 - 11Publisher
ElsevierLocation
Amsterdam, The NetherlandsPublisher DOI
ISSN
1566-0141eISSN
1873-6173Language
engPublication classification
C1 Refereed article in a scholarly journalCopyright notice
2019, Elsevier B.V.Usage metrics
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