Abdul Ghofar and Rizqi Alfi Aunilah
Brawijaya University
ghofar@ub.ac.id

Year: July 2016
Volume: 26 No. 1
Pages: 101-121

Abstract:

This research aims to investigate the existence of two market anomalies—accrual anomaly and winner-loser anomaly—and compare whether these two anomalies significantly affect the abnormal return in Indonesia Stock Exchange (IDX). This research was designed into three steps: (1) Portfolios formation; (2) Test of Existence; and (3) Regression analysis, using the observation period of six years starting from 2002 to 2007. We found that winner-loser anomaly has been more significant in affecting abnormal return for the period of 2002–2007, despite that both accrual and winner-loser anomalies were indicated to exist in the period of observation. The test of accrual anomaly existence during six-year observation period has revealed that in 2003, low accrual firms had generated higher abnormal returns compared to the high accrual firms, for which it indicates the existence of accrual anomaly. The existence of winner-loser anomaly is justified by the significant effect of overreaction on the price reversal phenomena. This research contributes to the study regarding accrual and winner-loser anomalies, attributed by the comparison between these two anomalies based on the statistical measurement analysis according to historical data. The results could be useful for investors to understand the characteristics of Indonesian capital market, in which the efficient market hypothesis is verified not to work properly, hence the publicly-available information should not be the sole information used to formulate their investment strategy.

 

Keywords: abnormal return, accrual anomaly, Efficient Market Hypothesis (EMH), winner-loser anomaly