STUDY OF THREE FACTORS MODEL FAMA AND FRENCH IN INDONESIA STOCK EXCHANGE (Study on the Stock LQ 45)

Abstract

This study examined empirically Three Factor Model Fama and French on stock returns LQ 45, using data over the period 2007-2009. Specifically, this study examines the behavior of stock prices in relation to company size and book-tomarket ratio. The main objective of this study was to provide evidence that will contribute to the effort to explain the Three Factor Model Fama and French in emerging markets. Our findings indicate a significant positive effect between the risk premium with stock returns, while the firm size and book-to-market ratio is negatively effect, but no significant on stock returns. Therefore, the two-factor Fama and French no proven effect on stock returns.