The Predictive Ability of U.S. Stock Market Skewness on Indonesian Stock Market Returns
Journal Title: Journal of Economics, Finance and Management Studies - Year 2024, Vol 7, Issue 05
Abstract
The three-moment capital asset pricing model (three-moment CAPM) suggests that the expected excess return on stocks should include compensation for skewness risk. This study aims to investigate the ability of U.S. stock market skewness to predict Indonesian stock market returns. The data used in this research includes the S&P500 Index, JCI, JII, and LQ45 from January 2001 to December 2022. The results of this study indicate that U.S. stock market skewness can predict future excess returns of the Indonesian stock market. Additionally, when the estimation model incorporates alternative variables from both the U.S. and Indonesian stock markets, the predictive ability of U.S. stock market skewness remains significant and outperforms these alternative variables. The findings of this research can be used as a strategy for investors when trading in the Indonesian stock market. When the skewness of the U.S. stock market increases, the return of the Indonesian stock market is expected to decrease in the following month.
Authors and Affiliations
Muhammad Sofian Maksar , Winda Sari Firdani , Inayah Abdillah Rabbani , Yuan Swastika , Rifqi Cipto Laksono
Keywords
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- EP ID EP736085
- DOI 10.47191/jefms/v7-i5-71
- Views 77
- Downloads 0
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