Test of Fama a French five factor-model on Indonesian stock market

Abstract

This study aims to test the Fama & French Five-Factor Model (5FF) and the Three-Factor Model (3FF) on stocks listed in the LQ-45 Index over the 2013-2015 periods. The 5FF model includes factors of market risk premium, size, book-to-market equity, profitability, and investment. This study used a multiple linier regression analysis model in the form of panel data for the entire portfolio and each formed portfolio. The number of observations in this study was 648 consisting of 18 portfolios over the period of January 2013 - December 2015. The research findings were similar to Fama and French research (2014) that is market risk premiere has significant effect on return. Profitability has a positive effect but not significant on return. Size and investment have a significant negative effect on return. The difference in yield lies in the profitability factor, whose effect is not significant on return.