Idiosyncratic volatility factor

Oct 13, 2025 by talynt.org 66 views

Introduction

The banking industry has undergone significant changes in recent years, with the increasing trend of banks going public. This shift has led to a growing interest in understanding the factors that influence the pricing of bank assets. One such factor is idiosyncratic risk, which reflects the unique volatility of a company. This study aims to explore the effect of idiosyncratic risk on excessive return on bank go public shares in Indonesia.

Background

The banking industry in Indonesia has experienced rapid growth in recent years, with many banks going public. This has led to an increase in the number of bank shares available for investment. However, the pricing of these shares is influenced by various factors, including idiosyncratic risk. Idiosyncratic risk is a measure of the unique volatility of a company, which can affect the return on investment.

Methodology

This study uses a quantitative approach with descriptive methods to analyze the effect of idiosyncratic risk on excessive return on bank go public shares in Indonesia. The study collects secondary data from Yahoo Finance and OK shares, covering the period January 2014 to December 2018. A total of 28 GO Public banks were chosen using purposive sampling, then grouped into four portfolios based on market capitalization and book ratios to the market.

Research Variables

The study considers the following research variables:

Idiosyncratic risk: measured through four aspects: idiosyncratic volatility, idiosyncratic volatility factor, idiosyncratic aggregate volatility, and idiosyncratic volatility late.
Market risk: measured through the market risk factor.
Company size: measured through the company size variable.
Book ratio to the market: measured through the book ratio to the market variable.

Data Analysis

The study uses multiple linear regression analysis to test the relationship between research variables. The results show that simultaneously, the risk of idiosyncratic, idiosyncratic volatility factor, idiosyncratic aggregate volatility, idiosyncratic volatility was late, market risk, company size, and book ratio to the market significantly influenced the excessive level of trust.

Partial Results

The study finds that:

Idiosyncratic volatility has a positive and significant effect on the excessive return on the bank portfolio with large market capitalization (B/L), medium (S/H), and small (S/L).
Idiosyncratic volatility factor has a positive and significant effect on the overdoing of the bank portfolio with moderate market capitalization (S/H) and small (S/L).
Idiosyncratic Aggregate Volatility has a positive and significant effect on the excessive return on the bank portfolio with small market capitalization (S/L).
Idiosyncratic volatility is late has a positive and significant effect on the excessive return on the bank portfolio with small market capitalization (S/L).

Conclusion

The study finds that idiosyncratic risk has an important role in determining the price of bank go public assets in Indonesia. The higher the risk of idiosyncratic, the higher the excessive return expected by investors. This may be because investors tend to ask for greater compensation to take higher risks. In addition, the volatility factor of idiosyncratic is also proven to contribute to excessive returns, which indicates that investors are sensitive to the factors that can affect the unique volatility of a company.

Implications

This study provides a better understanding of the factors that can affect the return of Bank Go Public shares. By understanding the role of idiosyncratic risk and related factors, investors can make better investment decisions and optimize their investment portfolio. The study also highlights the importance of considering idiosyncratic risk in the pricing of bank assets.

Limitations

The study only applies to Bank Go Public in Indonesia during the 2014-2018 period. Further research is needed to test the generalization of these results in different contexts.

Future Research Directions

Future research can explore the following directions:

Investigating the effect of idiosyncratic risk on the pricing of bank assets in other countries.
Examining the impact of idiosyncratic risk on the performance of bank shares in different market conditions.
Developing a model to predict the excessive return on bank shares based on idiosyncratic risk and other factors.

References

[List of references cited in the study]

Appendix

[Appendix materials, including additional tables and figures]
Q&A: Idiosyncratic Risk Analysis of Determining Assets Pricing in Bank Go Public ====================================================================

Frequently Asked Questions

Q: What is idiosyncratic risk? A: Idiosyncratic risk is a measure of the unique volatility of a company, which can affect the return on investment.

Q: How does idiosyncratic risk affect the pricing of bank assets? A: Idiosyncratic risk has an important role in determining the price of bank go public assets in Indonesia. The higher the risk of idiosyncratic, the higher the excessive return expected by investors.

Q: What are the factors that contribute to idiosyncratic risk? A: The study finds that idiosyncratic volatility, idiosyncratic volatility factor, idiosyncratic aggregate volatility, and idiosyncratic volatility late are the factors that contribute to idiosyncratic risk.

Q: How does market risk affect the pricing of bank assets? A: Market risk has a significant influence on the excessive level of trust, but its effect is not as strong as idiosyncratic risk.

Q: What is the relationship between company size and idiosyncratic risk? A: The study finds that company size has a significant influence on idiosyncratic risk, but its effect is not as strong as idiosyncratic risk.

Q: How does book ratio to the market affect the pricing of bank assets? A: Book ratio to the market has a significant influence on the excessive level of trust, but its effect is not as strong as idiosyncratic risk.

Q: What are the implications of this study for investors? A: This study provides a better understanding of the factors that can affect the return of Bank Go Public shares. By understanding the role of idiosyncratic risk and related factors, investors can make better investment decisions and optimize their investment portfolio.

Q: What are the limitations of this study? A: The study only applies to Bank Go Public in Indonesia during the 2014-2018 period. Further research is needed to test the generalization of these results in different contexts.

Q: What are the future research directions? A: Future research can explore the following directions:

Investigating the effect of idiosyncratic risk on the pricing of bank assets in other countries.
Examining the impact of idiosyncratic risk on the performance of bank shares in different market conditions.
Developing a model to predict the excessive return on bank shares based on idiosyncratic risk and other factors.

Q: What are the practical implications of this study for bank management? A: Bank management can use this study to better understand the factors that affect the pricing of their assets and make more informed decisions about their investment strategies.

Q: What are the policy implications of this study? A: The study highlights the importance of considering idiosyncratic risk in the pricing of bank assets, which can inform policy decisions related to bank regulation and supervision.

Q: What are the future research directions for this study? A: Future research can build on this study by exploring the following directions:

Investigating the effect of idiosyncratic risk on the pricing of bank assets in other countries.
Examining the impact of idiosyncratic risk on the performance of bank shares in different market conditions.
Developing a model to predict the excessive return on bank shares based on idiosyncratic risk and other factors.

Conclusion

This Q&A article provides a summary of the key findings and implications of the study on idiosyncratic risk analysis of determining assets pricing in bank go public. The study highlights the importance of considering idiosyncratic risk in the pricing of bank assets and provides a better understanding of the factors that can affect the return of Bank Go Public shares.