The Relationship in time between quarterly accounting returns and quarterly stock market returns :: The Indonesian case

WULANDARI, Dr. Suad Husnan, MBA

2001 | Tesis | Magister Manajemen

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This research examines the relationship between accounting returns and stock market returns in Indonesian context. The sample consists of quarterly data for 40 Indonesian companies from 1995 to 2000.A Granger Causality Test is applied to the two return series for each of the sample-companies. Granger Causality Test conducted to establish whether accounting returns lead stock market returns or whether stock market returns lead accounting returns. A series of a correlation test run across both sets of variables for two kind of lags reveals that the only significant correlation coefficient is between accounting returns and accounting returns lagged by one period. The Granger Causality Tests involve running regressions in restricted and unrestricted equations. The former includes only lagged values of the variable in question, while the later includes lagged values from the other return series. Two sets of regression were run to distinguish whether accounting returns lead stock market returns or vice versa. This research seeks to contribute something new to the efficiency literature by testing the informational efficiency of the market in impounding, before the accounting numbers do, the effect of events that will subsequently affect accounting rates of returns. The result suggests that both stock market returns do not lead accounting returns and that accounting returns do not lead stock market returns. The similar result was obtained when the probability values form the two sets of regressions were subjected to a Mann Whitney U Test, that neither series leads the other.

Kata Kunci : Pasar Modal,Return Saham,Indonesia