10
CHAPTER II THEORETICAL BACKGROUND AND PREVIOUS RESEARCH
2.1 Theoretical Background 2.1.1
Investor
According to Liaw 2004 investors clients can be distinguish between investment management for individual investors and institutional investors.
According to Investopedia, definition of Individual investor is investors who buy and sell securities for their personal account, and not for another company or
organization http:www.investopedia.com. Investopedia define institutional investor as a non-bank person or organization that trades securities in large
enough share quantities that they qualify for preferential treatment and lower commissions. http:www.investopedia.com. McMillan et al. 2011 explain that
Individual investors’ short term goals planning are such as providing children’s education, saving for major purchase or starting business and also to get income in
the retirement period.
2.1.2 Nature of Investment
Jones, Charles P. 2009 define that an investment is the commitment of funds to one or more assets that will be hold over some future period. It is
concerned with the management of investor’s wealth. Rose, Peter S. and Marquis, Milton H. 2008 explains that investment generally refers to the
acquisition of capital goods such as buildings and equipment, and the purchase
2.1 Theoretical Ba a
ck ckground
2.1.1 Inve
e st
stor
A According to
o L
Lia iaw
w 2004 investors cli
li en
nts ts c
c a
an be distingu u
is i
h between in
n v
vestment nt
m m
an an
ag emen
en t
t fo
r individual inv
esto rs
rs and i
i ns
n ti
ti tu
tu ti
ti onal inv
nvestors. Acco
rd rdin
in g
g t to Inv
nv es
to pe
dia, definition of
Individual in ve
st or
r is inve
e st
st or
or s
s who
bu b
y an
n d
d se
l ll sec
ec ur
ities for th ei
r personal a
ccount, an d
not for an ot
other co
comp mp
any o or
or or
ga ga
ni za
a t
tion http:www.i
nv es
tope di
a. com.
In ve
stopedia defin e
e in
nst stit
it ut
ut io
i nal
l investo
or as a non-
ba nk perso
n or
org aniz
at ion that
tra de
s securi t
ties in larg rge
e enoug
gh share quantities
th at t
hey qualify
fo r pr
eferential treatme nt
t and l l
o owe
er comm
mi is
si ons.
ht tp
p :
w w
ww ww
i .i
nv nv
es es
topedia.com m.
Mc Mc
Mi Mi
ll ll
an an
et a
l. 2
01 1
e e
x xplain t
t ha
ha t
t Individual investors’ short term go
o al
als pl pl
anning are such as providing childr dren
en ’
’s ed
educ uc
at at
io io
n, saving for major purchase or starting business and also to ge ge
t t
in inco
come me
in th
th e
e re
r tireme
t nt per
io io
d. d.
2.1.2 Nature of Investment
Jones, Charles P. 2009 de
d fine tha
at an investment is the commitment of funds to one or more assets that
t will
l be hold over some future period. It is concerned with the management of
o investor’s wealth Rose Peter S and
11 of inventories of raw materials and goods to sell. The form of investment for
business firm, government, and house hold is different. In business firm, expenditures on capital goods and inventories are including as investment
expenditures. For government, the spending to build and maintain public facilities is the form of investment. And in the household the form of investment
is such as purchase a house. Investments often require huge of funds, especially business firm as the leading investment sector in the economy, but it can
increase the productivity of labor and leads to higher standard of living. The huge funds can be raised quickly by selling financial claims in the financial
markets. Financial claims promise investors to get a future flow of income the form of dividends, interest, and other return. Investor will expect not only
recover the original fund but also additional income as reward for waiting assuming risk, even there is no guarantee that the expected income will ever
materialize. According to Damodaran, Aswath 2012 there are three steps that
investors consider in investment choices, such as: a Asset allocation, in these step investors will determine which asset
classes to invest their funds in. this is the first and the most important step and will depend on investor preferences.
b Asset selection: in asset classes that choose in the first step investors have to choose the specific asset to hold.
expenditures on capital go go
od ods and inve
nt nt
or or
ies are including as investment expenditures. For
r government, the spending to bu
buil il
d and maintain public facilities is
s th
the form of investme m
nt n
. An
An d
d in
in the
he household the
f f
or o
m of investment is suc
c h
h as purchase e
a a
ho hous
u e. Investments oft
f en r
r eq
eq ui
ui re
re huge of fun
ds ds
, especially bu
business f fir
irm m
as the
e l
lea di
ng inves tm
ent sect or
r i
i n
n the
ec ec
on on
o omy, but
ut it can increa
ea se
se t t
h he p
p r
rodu ct
iv ity of labor a
nd leads to hi
gh er s
ta tandar
d d of
of l
l iv
iv ing.
T T
he hu
hu ge fund
ds can be rais
ed quickly
by selling fi
na ncial clai
ms s in th
th e
e f financia
al ma
ma rk
et t
s s.
Financial claims pr
omise inve
stors to
g et a future flow
o o
f in nco
come me
the form
of divide nd
s, i
nterest, and
o th
er ret
urn. Inves to
r will exp
e ect not on
n ly
ly recov
ve r the original fun
d bu t
also add it
io nal
income as reward for w
w ai
aiting g
assu um
mi ng r
is k,
e ve
e n
n th
th er
er e
e is
is no guarantee th
th at
at t
t he
he e
e xp
xp ecte
d in
co me
me will ev
ev er
er materialize.
According to Damodaran, Aswath 2012 there are thre e
e e
step eps
s t
t h
hat in
inve v
stors cons id
ider r
i i
n n
in in
v vestment
nt c cho
hoic ices
es ,
, s
such as: a
As As
s set allocation, in
in these ste tep investors wi
i ll
ll d
d et
e er
mi ne
ne w
w hi
ch asset classes to invest
their fund ds in. this is the first and the most
important step and d
will depe end on investor preferences.
b Asset selection: in n ass
s e
et classes that choose in the first step investors have to choose
e the specific asset to hold
12 c Performance Evaluation: The judgment that investors made to
choose investment will depend on how the investor measure risk and trade off to get higher return.
According to Jones, Charles P 2009 the foundation for making investment decision are the tradeoff between expected return and risk, the investment
decision process that practiced nowadays is the great unknown; all the investors have to deal with uncertainty that the realized return on any risky assets may be
different from what was expected. Third is the global investment arena, where investors have to think investment in a global context and the last is importance of
internet, where investors can access a wealth of information about investing, trade cheaply and quickly for their investment. According to Obamuyi, Tomola Marshal
2013 there are five principal factors that influencing investment decision, which are performance of the company’s stock, expected stock splitcapital
increasesbonus, dividend policy, expected corporate earnings and get-rich-quick. That research also found that the socio-economic characteristics of investors age,
gender, marital status and educational qualifications influence in the investor investment decision. According to Barber and Odean 2001 selecting common
stocks that will outperform the market is a difficult task. According to Chandra, Abhijeet 2009 Individual investors take trading
decisions based on their self-perceived competence that is influenced by several factors, such as:
and trade off to to
g get higher retu
turn rn
. According to Jones
es , Charles P 2009 the foundation
on for making investment ff
decision are e
the tradeoff betw tw
ee ee
n n
ex ex
pe pe
ct ct
ed d
return and ri sk
sk ,
, the investment
decision on process tha
t t
pr pr
ac ac
t ticed nowadays is t
h he g
gre re
at at
u unknown; all
t t
he h
investors ha
a v
ve to de e
al al w
wit ith
h unce e
rt rt
ai ai
nt y
that the r
ealized re tu
u rn
rn on an
ny y ri
ri sk
sk y
y assets
m m
ay be differen
en t
t fr
fr om
w w
ha t
wa s expected.
Th ird is the glo
ba l in
ve vestment
nt a are
re na
n , wh
where in
n ve
ve st
t ors ha
ha ve
to think in ve
stment in a
gl obal con
te xt
and the l as
t t
is imp mp
or or
tance o of
in inte
te r
rnet, ,
wh ere investors ca
n ac
cess a w
ealth of i
nformation about i
n nvesti
ti ng
ng ,
t trade
cheapl y
y an d quickly
fo r their in
ve stme
nt . Ac
co rd
ing to O
ba mu
yi, To m
mola Marsh h
al a
2 013
there are five principa l fa
ct ors that
i nf
luen ci
ng investment de ci
ision, w whic
h h
are pe
pe rformance
of of
t t
he he
c c
om o
pany’s sto to
ck ck,
ex ex
pe pe
cted s
to ck
s s
p plitcap
p it
it al
al increasesbonus, dividend policy, ex
xpe pect
cte ed corporate earnings and get-rich-q
-q ui
u ck
ck .
Th That
t r
r es
es earch also found that the socio-economic characteristics of in
n ve
vestor ors
s a
a g
ge, ge
gend nder, ma
i ri
t ta
l l st
at atus
us a
a nd
nd educa ca
ti tion
onal al q
q u
ua l
lificati i
on on
s s
i i
nf nf
l luence
i in the
e in in
v vestor
invest st
me me
nt dec c
is is
io ion. According
t t
o o
Barber er and Odean 20
2001 01
se le
ct ct
in ing common
stocks that will outperform the m market is a d
difficult task. According to Chandra, Ab
Abhijeet 2 2009 Individual investors take trading
decisions based on their self-percei ive
v d
c competence that is influenced by several
factors such as:
13 1. Income
Chandra, Abhijeet 2009 explain that Individual with higher income found to be more confidence than individual with lower income. It is prove that
investor with higher income is more confidence to make a judgment in investment. This research found that significant income level leads investors to be
more confident and they are more willing to act on their own judgments in term of investment in stock market.
2. Gender As stated on Barber and Odean 2001 that Psychological research has
established that men are more overconfidence than women, especially male- dominated in finance sector. The result of the research are supported the financial
model that men are more confidence than women. Men trade worse than women and they reduce their return more so than women do.
3. Age Chandra, Abhijeet 2009 explain that investor trade less frequently as
they grow older, they tend to play safe with their funds. The research also found that investors in the age group 25-35 years and 35-45 years are more competence
and having more passion in high return. 4. Knowledge
a. Education Background Chandra, Abhijeet 2009 explain that perception and
knowledge of investors could make them become overconfidence. Higher level of education makes an investor feel competence and
found to be more confidence e
th than individua
a l
l wi
w th lower income. It is prove that
investor with high gh
e er income is more confidence
t t
o o
make a judgment in investment. Th
This research found d
th h
at at
sig g
ni ni
fi fi
ca c
nt nt
income level le ead
a s investors to be
more c c
o onfident and t
t h
hey y
ar ar
e more willing to act on n
t he
he ir
ir own judgmen
n ts
t in term of
in n
v vestment
nt i
i n
n st
st oc
o k ma
a rk
rk e
et .
2. 2
Ge Ge
nd n
er As
s s
ta ted on Bar
be r and Od
ea n 2001
t ha
t Psycholo gi
gical re rese
se ar
ch ha as
es esta
ta b
blish hed
that men are m or
e over co
nfiden ce
than women, e sp
pecia a
ll lly
y ma
m le-
do mi
na a
te d in finan
ce s
ector. The r
es ul
t of t
he r
esearc h
ar e
supported th
t e financ
c ia
ia l
model l
that men are more co nfid
en ce than
wo me
n. Men trade worse t
than wo wome
n n
and th
th e
ey reduce
thei r
r re
re tu
tu rn
rn m
m or
or e so than wome
me n
n do
do. 3. Age
Chandra, Abhijeet 2009 explain that investor trade less fr fr
eq eque
ue n
ntly ly
as th
th ey
ey grow l
ol d
der, t he
hey y
te tend
nd to pl l
ay ay
s s
af af
e e wi
with th their
f fun
un ds
ds .
. Th The research a
a ls
lso o
f found
that i
inv nves
e tors in
n th
the age group 25 5
-3 -
5 year r
s s and 35-45 year
ars s
ar ar
e more re
c competence
and having more passion in high return.
4. Knowledge a. Education Backgroun
nd Chandra
Abhij ij
eet 2009 explain that perception and
14 lead them to make frequent trading decision in financial market.
Education status determines their understanding of financial product, offers, and opportunity that makes them to be more
confidence in makes a financial decision. b. Information
According to Merton, Robert C. 1987 based on asset pricing models, investors act on every type of publicly available
information instantaneously as soon as it received. There are two information costs: 1 the cost of gathering and processing data and
2 the cost of transmitting information from one party to another source of information such as firm itself, stock market advisory
services, brokerage houses, and professional portfolio managers .
According to Lee et al. 2008 nowadays Individual investors become more dependent on multimedia information and increase
their understanding by information that posted on the web. Investors will collect all the relevant company stock information
before they decide to investing their funds. This research is using control variable to clearly explain the influence of
main variable or the independent variable which is investor attention of company stock information using Google search volume to the dependent variables. It
support by dictionary.com that control variable is a factor held constant to test the relative impact of an independent variable http:dictionary.reference.com.
Control variable that used in this research are: product, offer
r s
s, and opportu tuni
ni ty
ty that makes them to be more
conf f
id id
en ce in makes a financial decision.
b. b.
Information Ac
Ac co
co rding to Merton, R
Rob ober
rt t C.
C 1987 base
sed on asset pr
pr icing mo
mo d
de ls, investo
rs act on
ev er
er y
y type
e of
f pu
publicly a ava
v ilable
in in
f format
ion instantane ou
sly as soon as it r
ec c
ei e
ve d
d. T The
here re
are two
informatio n
costs: 1 t he
cost of gat he
ring and p ro
ocess s
in ing
g d
data an nd
2 the cost o
f transm
itti ng inf
or ma
tion from one pa
a rt
r y to
to a
a no
no ther
so ur
ce o
f inform at
ion su
ch as
firm i tsel
f, stock m
ar ke
k t adviso
o ry
ry services, br
okerag e
houses, an
d pr ofessional portfol
io o mana
agers s
. Ac
co rd
rd in
in g
g to
to L
L ee et al. 200
00 8
8 n
n ow
ow ad
ad ay
s In
dividu u
al al investo
to rs
rs become more depend
nd en
en t
t on multimedia information and incr
crea ea
s se
their understanding by information that posted o o
n n
h the
e we we
b. I
Inve e
st stor
or s
s will col ol
le lect
ct a a
ll ll
t t
he he
relevan n
t t
co comp
m any stoc
k in
n fo
form rm
ation be
be fo
fore they decide t
t o invest
t in
ing their funds. This research is using co
ontrol varia a
ble to clearly explain the influence of main variable or the independent
t variable
w which is investor attention of company
stock information using Google se search
h volume to the dependent variables. It support by dictionary com that control
l variable is a factor held constant to test the
15 a Size
According to Cornett et al. 2009 company size can be measure by market capitalization or market value. According to InvestingAnswer market
value of equity is the total market value of all of a companys outstanding shares http:www.investinganswers.com.
b Market to book ratio Market to book ratio is risk factors that must be consider by the investor. If
the price is high it indicating that the firm is undervalued. A value that less than 1 is means that the firm is undervalued. The higher the market to book ratio is better
the firm. c Age
The company age, start from the company IPO until the years 2013. d PE ratio
Price earnings ratio PE ratio is to understand the effect of market towards stock performance that can be seen from the EPS. It compares the stock
price with earning per share. According to Cornett et al. 2009 price earnng ratio is measure the willingnes of investors to pay for each dollar the company earn per
share of its stocks. The higher the price earning ratio is the better the compamy performance.
market capitalization or mar ar
ke ke
t t value. A
A cc
ccor or
ding to InvestingAnswer market value of equity is t
t he
he total market value of all of a comp mpanys outstanding shares
http:www. w.
in investinganswers.c
c om
om. b M
Market to bo ok
ok r
r at
at i
io Ma
a rk
rk et
et t t
o o
book k
r r
at at
i io
is risk fac to
rs that mu st
st b
b e cons
sid ider
er b
b y
y the inve
vestor. If the pr
pr ic
ic e
e is
is h
igh h
i it
ind ic
at ing that the f
ir m is undervalu
ed .
A A value t
t ha
ha t
t le
le ss tha
han 1 is m
m eans tha
ha t
the firm is un
dervalued. T
he higher th e
market to bo
book r rat
atio io
is bett e
er th
th e
e fi
f rm
. .
c Ag
e The co
o mp
any age, start fro m
the co
mpany IP O
un ti
l the years 2013. d
d P
E ra
ti o
Price earnings ratio PE ra ra
ti t
o o
is to understand the effect of ma mark
rk e
et to
towa ward
rd s
s stock performance that can be seen from the EPS. It comp
p ar
ar es
es the he s
s to
to ck
pr pric
ice e
with h
ear i
ning p p
er er s
s ha
hare. Acco co
rd rdin
in g
g to to C
Cornett et
et a
a l.
l 2
2 00
00 9
9 p i
rice ear ar
nn nn
g g ratio
is mea ea
su su
re the w w
il il
li lingnes of inves
s to
t rs to pa
pay for each dol l
la la
r r
th th
e comp mp
an any earn per
share of its stocks. The higher th the price ea
a rning ratio is the better the compamy
performance.
16
2.1.3 Capital Market
According to Rose, Peter S. and Marquis, Milton H. 2008 capital market is designed for long term loans credit investment by business, government, and
household. The original maturity of this financial instrument is more than one year and the range loan in size from small to multimillion credits. Obamuyi,
Tomola Marshal 2013 define that efficient funds transfer between lender and borrower is the basic function of capital market. There are three basic objectives
which makes investors invest in capital market: 1. Wealth maximization
2. Liquidity maintenance 3. Risk minimization
According to Fabozi, Frank J. and Drake, Pamela Peterson 2009 there are two types of capital market securities which are equity and debt. Equity is
issued by corporations and represents shares of ownership interest. It includes common stock and preferred stocks. Common stock is a perpetual security that
has no maturity and it is represent the ownership of the corporation. Preferred stock is representing ownership interest in a corporation that has redemption date.
And the other capital market securities is debt obligation that issued by corporation and local government. It is a financial instrument whereby the
borrower promises to repay the maturity value one year after insurance. According to Rose, Pet
et er
er S
S. and Marq rqui
ui s, Milton H. 2008 capital market
is designed for long ng term loans credit investment by
b b
us u
iness, government, and household.
. T
The original matu ur
rity y
o o
f th th
is is
f f
inan an
cial instrumen n
t t
is more than one year a
and the range e
loa oa
n n
in size from small l
to mu mu
lt ltim
im illion credits
ts .
. Obamuyi,
T Tomola M
M ar
ar sh
sha al 2013
13 define that
ef ficient fu
nd nds
s transf
f er
er b
b et
et w
ween len nde
d r and
borr r
ow ow
er er
i is th
h e
e ba
si c
function of capital market. There ar e
e th
t ree ba
ba si
si c
c ob
o ject
tiv i
es wh
wh i
ic h
h ma a
k ke
s investors in ve
st in capi ta
l market: 1. Wealth maximization
2. Li qu
id it
y mainte na
nc e
3. Risk minim izatio
n Acco
rd in
g to
o F
F ab
ab oz
oz i
i, F
F ra
r nk J. and Dr
Dr ak
ak e
e, P
P am
am el
a Pe
terson 20
2009 th her
er e
e are two types of capital market se
e cu
curi i
ti ti
es which are equity and debt. Equi uity
ty i
is is
issu s ed
ed b
b y
y corporations and represents shares of ownership interest
st .
. It
It i i
nc nclu
lud des
co comm
mmon sto k
ck a nd
nd p pre
re fe
ferred sto tock
cks s
d .
. Co
Co mm
mmon sto ck
ck i
is s
a perpetua l
secu curi
rity ty that
has no no
m m
aturit it
y y
a and it is represen
ent the ow ownership of the
he c c
or o
po p
rati ti
on on. Preferred
stock is representing ownership i interest in a
a corporation that has redemption date. And the other capital market
securitie s
s is debt obligation that issued by corporation and local government
nt . It
is a financial instrument whereby the borrower promises to repay the maturit
it y value one year after insurance
17 There are some indicators that can be used to measure the performance of
capital market. These indicators such as: a The number of listed company, according to businessdictionary.com this is
the sum of company that listed on each of stock market. Company listed is firm whose share is listed quoted on an exchange market for public
trading. A company can be listed on more than one exchange market that called dual listing http:www.businessdictionary.com. The more the
number listed company it means that the more liquid that market. b Total Trading Volume, it is measure how many trades take place for
a security or on an exchange on a given trading day. A high trading volume is an indicator of a high level of interest in a security at its
current price. It is an important tool in technical analysis, trading volume is used to determine the strength of a market indicator http:financial-
dictionary.thefreedictionary.com. c Market Volatility, according to investorwords it is the unpredictable and
vigorous changes in the price within the stock market. It is necessary for some movement within the market in order to sell commodities, however a
volatile market represents the most risk to investors
http:www.investorwords.com. Investopedia defined that market volatility is a statistical measure of the
dispersion of returns for a given security or market index. Higher the volatility are the riskier the security http:www.investorwords.com.
Market volatility will measure from these two components which are Risk a The number of listed c
c om
ompany, acco rd
rd in
in g
g to businessdictionary.com this is
the sum of c c
o ompany that listed on each of stock
k ma
m rket. Company listed is
firm w
whose share is list st
ed d
qu u
ot ot
ed ed
on on
an exchange ma
m rket for public
t trading. A com
om pa
pa ny
ny can be listed on more
e t tha
ha n
n one exchange
e market that
call ll
ed ed
d d
ua u
l list st
in in
g h
tt p:ww
w. busine
ssdi dict
ct io
i nary.c
c om
om .
. The m
mor o
e the nu
nu mb
m er l
l i
iste d company it means that the more
l iq
ui d
d th t
at mar ar
ke ke
t. t.
b b
Tota ta
l Trading Vo
lu me, it is
me asure ho
w many tr
ad d
e es take
ke p
p lace fo
or a
a se
curity or on an ex
change on
a g iv
en trading day
. A
high gh
t t
ra ra
ding volume i
s an
indicator o
f a
hi gh
lev el of
in te
re st in a
se c
curity at i it
s s
current price. It is an imp
or tant too
l in tech
nical analysis, tr ad
ding vo o
l lum
me is use
d to d
et et
er er
mi mi
ne ne
t t
he h
strength of f
a a
ma ma
rk rk
et et
indic at
or ht
tp p:
: financi
ci a
al -
- r
dictionary.thefreedictionary.c .c
om om
. c
c Market Volatility, according to investorwords it is the unpr
p ed
ed ic
icta a
bl ble
e a
and vi
i gorous
h chan
an ge
ge s
s i
in the pr pr
ic ice
e wi
with th
in in
the stoc c
k k
ma ma
k rk
t et.
I It
i is nece
cess ssar
ary for so
s me mo
mo ve
vement within the he market
in in order to sell
l co
co mm
mm oditie
ie s
s, h
however a volatile market
represent ts the most
risk to investors http:www.investorword
d s.
s com.
Investopedia defined that m market
et volatility is a statistical measure of the dispersion of returns for a gi
i ven security or market index Higher the
18 of Market and Return of Market. Risk of Market shows the Risk of each
market that will take by the investor. Risk of market can either be measured by using the standard deviation or variance between returns
from that same security or market index http:www.investopedia.com. d Market Capitalization, According to investorwords, it is represents
the aggregate value of a company or stock. It is obtained by multiplying the number of shares outstanding by their current price per share. Market
capitalization is use to see the size of the market. The higher the amount of capitalization market it is means the higher the size of the market
http:www.investorwords.com
2.1.4 Random walk Theory and Efficient Market Hypothesis
According to Bodie et al. 2008 random walk theory is the notion that stock price changes are random and unpredictable. If stock price movement were
predictable, that would be damning evidence of stock market inefficiency. According to Rose, Peter S. and Marquis, Milton H. 2008 the efficient
markets hypothesis suggest all information that has bearing on the market value the prices of that assets. Bodie et al. 2008 define that efficient market hypothesis
is the hypothesis that prices of securities fully reflect available information about securities. It’s clearly define by McMillan et al. 2011 that efficient market is a
market in which asset prices fully reflect all past and present information; market in which asset prices reflect the new information quickly and rationally. The
important point of efficient market is price should be expected react only to the measured by using th
th e
e standard d d
ev evia
ia tion or variance between returns
from that sa a
m me security or market index http:
ww www.investopedia.com.
d Mark k
e et Capitalization, A
A cc
cc or
or di
di ng
ng to
o investorwords,
s it is represents
t the aggregate
e va
va lu
lu e
e of a company or stock
k. . It
It i
i s
s obtained by y
multiplying the
e nu
nu mb
mb er
of sh sh
a ar
es outstandi
ng by the
ir c
c ur
ur rent pr
pr ic
ic e
e pe
per share. Market
ca ca
pi pi
ta liza
za t
tion i s
us e to see the
s iz
e of the marke t.
T he
he highe h
r r
th th
e e
am a
ou n
nt of capi
pi t
ta lization mar
ke t it is means the
hi gh
er the s iz
e e of
t the
he marke
et h
htt p:
www.investor wo
rds.co m
2.1.4 Random walk Th
eo ry a
nd Efficie
nt Mar
ket Hypothesis
Acco rd
in g
to o
B B
od od
ie ie
et et
al. 2008 rand
nd om
om w
w al
al k
k th
eory i
s th
e e n
notion t t
ha ha
t t
stock price changes are random and nd
u u
np np
r redictable. If stock price movement
t we
we r
re pr
pred edic
ic ta
ta ble, that would be damning evidence of stock market inefficien
en c
cy. Ac
A co
d rd
i ing
to to
R R
o ose, Peter
r S
S. an
an d
d Ma Ma
rquis, M
M il
il to
to n
n H
H. 20
20 08
08 the
e ef effi
ficient mark
ket et
s s
hy y
po p
th th
es es
is is suggest all inf
nformation on that has bear
in in
g g
on the e
m m
a arket value
the prices of that assets. Bodie et t al.
2008 define that efficient market hypothesis
is the hypothesis that prices of se ecurities fu
fully reflect available information about securities. It’s clearly define by Mc
cMilla lan et al. 2011 that efficient market is a
market in which asset prices fully refle le
ct all past and present information; market
19 elements information release such as unexpected or surprise information and
investors process the unexpected information and revise expectation. Rose, Peter S. and Marquis, Milton H. 2008 explains that if efficient
market hypothesis is correct, investors will react to temporary underpricing or temporary overpricing of assets and make changes in their portfolios because any
temporary deviation of actual returns from expected returns should be eliminated. McMillan et al. 2011 also stated that there are some factors that
contributing to market efficiency such as market participants where the number of investors individual and institutional related to the market efficiency. Other
factor is information availability such as trading activity and traded companies and financial disclosure
. There are two costs that incurred by traders in identifying
and exploiting possible market inefficiencies affect the interpretation of market efficiency. First is transaction cost, according to Investopedia
http:www.investopedia.com it is an expenses that incurred when buying or selling securities. Transaction costs include brokers commissions and spreads the
difference between the price the dealer paid for a security and the price the buyer pays. Second is information acquisition cost, the cost of a business to acquire a
new customer. The company recognizes costs, including marketing and incentives, to introduce new customers to the companys products and services.
The customer acquisition cost is calculated by dividing total acquisition costs by total new customers over a set period of time.
According to Bodie et al. 2008 in market equilibrium, efficient informational gathering should be beneficial, because when information cost
Rose, Peter S. and M M
ar arquis, Milton
n H
H . 2008 explains that if efficient
market hypothesis is is correct, investors will react to
te te
mp m
orary underpricing or temporary ov
overpricing of assets s
an n
d d
ma ma
ke ke
c c
ha ha
ng ng
es in their port rtfo
fo lios because any
tempor r
a ary deviation
o of
a a
ct t
u ual returns from expecte
e d
d r
re tu
turns should be e
eliminated. Mc
Mc Mi
Mi ll
l an
a et a
a l
l. 2
011 also stated t ha
t t
th th
ere ar ar
e so
so me
m facto
tors that contri
ri bu
buti ting
ng to
m ma
rket efficiency such a
s market participa nt
t s
s where
e th
th e
e nu
n mb
b e
er of in
n ve
ve st
t ors i
i nd
ividual and institutiona l
related t
o th
e market e
e fficie
ie nc
nc y
y. Oth e
er fa
fact ct
o or is
s in
fo rmation availa
bi li
ty suc h
as tradi ng
activity and tr ad
d ed
e c
com ompa
pa nies
an d
fin nanc
ial disc lo
sure .
. There
are tw
o co st
s th at incur
re d by
traders i
n n identifyin
ing g
and ex x
ploiting possible ma rket
i ne
fficienc ie
s affe ct the interpretatio
n n of m
m a
arke et
effici cien
en cy.
Fi rs
t is
is t
t ra
ra ns
n action cos
s t
t, a
a cc
cc or
or di
d ng
t o
In Inv
vestoped ed
ia ia
h ttp:www.investopedia.com it i
i s
s an n
e xpenses that incurred when buyin
ing g
o or
se sell
l in
ing g
securities. Transaction costs include brokers commissions and d
s s
p prea
ea ds
ds t
the di
di ff
ffer e
ence b
b t
etween t t
he he
p p
i rice the
d d
ea ea
le le
r r pa
paid id
f for a sec
ecur ur
it ity
y an
d d
th the price
th th
e b
buyer pays
. Se
S cond
d i
i s
s in
information acqu quisition
c cost, the cost o
f f
a a
bu b
siness ss
t t
o o acquire a
new customer. The company y recognize
es costs, including marketing and incentives, to introduce new cus
to t
mers to o
the companys products and services. The customer acquisition cost is cal
alcula a
t ted by dividing total acquisition costs by
total new customers over a set period of o
time
20 investors’ money to uncover and analyze, investors will expect the investment
analysis result can increased the expected return and investor will have an incentive to spend time and resources to analyze and uncover new information
only if that activity can generate higher investment return. According to Fama 1970 in McMillan et al. 2011 there are three forms of
efficiency that shows in Table below:
Table 1 Three Forms of Market Efficiency
Market Prices Reflect : Forms of Market Efficiency
Past Market Data
Public Information
Private Information
Weak form of market efficiency √
Semi strong form of market efficiency
√ √
Strong form of market efficiency √
√ √
Source: McMillan et al. 2011 According to Fama 1970 in McMillan et al. 2011 the securities prices
in the weak form fully reflect the past market data, which refers to historical prices and trading volume information. The investors cannot predict the future
prices changes by extrapolating prices or pattern of prices from the past because it’s already reflected in current prices.
Prices in Semistrong form efficient market reflect all the past and publicly available information. In Rose, Peter S. and Marquis, Milton H. 2008 all buyers
and sellers are rational and use the all publicly available information to help them value financial assets.
Strong form shows that securities prices is fully reflect all the public and private information such as information that possessed by insiders who work with
incentive to spend time and re re
s sources to ana
naly ly
ze and uncover new information only if that activity
y ca
can generate higher investment retur r
n. n
Accord d
in ing to Fama 1970
in n
Mc M
Mi Mi
ll ll
an an
et et
al. 2011 there
e a a
re three forms of efficien
ency that shows s
in in
T T
ab a
le below:
Table 1 Three Forms of Market Effici
en n
cy cy
Mark et
Prices Reflec t
: Fo
orm rms of M
M arket Efficiency
Pa st Marke
t Data
Public Information
Pr P
ivat t
e e
In n
fo form
r at
i io
We Weak f
f o
or m
of m
arket efficien cy
√ Semi
str ong
form of ma
rk et
efficie en
cy √
√ St
S rong
g form of market efficien
cy √
√ √
So o
ur ur
ce e
: McMi
ll an et a
l. 2
011 According to Fama 197
7 0 i
i n
n Mc
Mc Mi
Mi ll
llan et al. 2011 the securities pr pr
ic ic
e es
in in
t t
he h
weak form fully reflect the past market data, which refers to h h
is isto
tori ri
c cal
pr pr
ic ic
es es a
and nd
t t
ra ra
di di
ng ng v
vol olum
um e
e in
info fo
rm rmat
at ion.
n. T
The he
i inv
nv es
es to
to rs
rs c
c an
an no
no t
t pr
pr ed
ed ic
ict t
th th
e e fu
fu ture
pric ices
e c
c ha
ha ng
ng es
es b
by y
ex ex
tr trapolating
g pr
p ices or pa
pa tt
ern of p ri
ri ce
ce s
fr fr
om om
t t
he he
pas s
t t because
it’s already reflected in current pr r
i ices.
Prices in Semistrong form m efficient m
market reflect all the past and publicly available information. In Rose, Pete
ter S. a a
n nd Marquis, Milton H. 2008 all buyers
and sellers are rational and use the all l
p publicly available information to help them
21 the company and have access to its privileged information as stated in Rose, Peter
S. and Marquis, Milton H. 2008.
2.1.5 Asymmetric Information
According to Rose, Peter S. and Marquis, Milton H. 2008 asymmetric information is view that disputes the financial marketplaces contains pockets of
inefficiency in the availability and use of information. According to Investopedia, definition of asymmetric information is a
situation in which one party in a transaction has more or superior information compared to another http:www.investopedia.com. Others web sources
http:www.economicshelp.org also stated that asymmetric information is a situation where there is imperfect knowledge. In particular, it is occurs where one
party has different information to another. Asymmetric information should be eliminate through the increased of advanced technology because more people
being easily to get information investopedia.com. Many analysts agree that asymmetric information is harder to come by in developed than developing
markets because information in developed markets easily spread timely in everywhere.
According to Rose, Peter S. and Marquis, Milton H. 2008 asymmetric information give consequences for the financial marketplace because there will
be variations in both quantity and quality of the information available. But, the important point is that not all the information is good information, just having
information that others don’t have doesn’t make the information more valuable or
2.1.5 Asymmetric
ic I
Information
Acco o
rd rding to Rose, Pete
te r S.
S. and
nd M
M ar
ar qu
qu is, Milton H.
2 2
008 asymmetric inform
m a
ation is view th
that at
d d
isputes the financial ma mark
rket et
p places contain
ns s
pockets of in
n e
efficiency cy i
i n
n th th
e avai i
la la
bi bi
li ty
and use of inform at
io io
n. n.
Ac Ac
co rd
d in
in g
to Investopedia, d
efinition of a
symm et
etric i
info fo
rm rmat
at ion
is i
a situ
tu at
t i
ion in n
which one p ar
ty in a transaction ha s
more or su pe
erior i
i nf
nf o
ormation on
co co
mp m
ared ed
to another h ttp:
www. in
vestop ed
ia .com. Others
we w
b b
so so
u urces
http: www.econom
icsh elp.org
a ls
o st
ated that asym me
tric inf or
m mation is
a a
situati io
n where there is imp erfe
ct knowled
ge . In
particular, it is occur s
s wher r
e e on
e party
y h
ha s
diff eren
t in
in fo
fo rm
rm at
at io
io n
n to another. A
A sy
sy mm
mm et
et ri
r c
info rmat
io o
n n
should b be
e eliminate through the increased of
of adv
dv anced technology because more pe
peop op
l le
be bein
in g
g ea
e sily to get information investopedia.com. Many analy
y st
st s
s ag
agre ree
e th
that as
asym ymmetr
i ic
i i
f nforma
ma ti
ti on
on i
is ha rd
rd er
er t
t o
o co co
m me by
in in
d d
ev ev l
elop d
ed t h
han de dev
velo loping
mark ket
et s
s becaus
us e
e i
information in n develop
oped markets eas as
il il
y y
sp p
read ad timely in
everywhere. According to Rose, Peter
r S. and M
Marquis, Milton H. 2008 asymmetric information give consequences for
r the
financial marketplace because there will be variations in both quantity and qua
u lity of the information available But the
22 even correct http:www.investinganswers.com. It’s supported by Rose, Peter S.
and Marquis, Milton H. 2008 that market inefficiency can be created by the presence of imperfect or bad information.
This is the theory where there are two kinds of investors, informed investor and uninformed investors. It can give unequally condition because the
informed investor can have more information and knowledge that can give them a better understand and result in decision making to do investment as stated in web
sources http:www.investinganswers.com. It’s supported by Rose, Peter S. and Marquis, Milton H. 2008 that in the real word there is no market that either
completely efficient or completely asymmetric, this book split the real world market into two segments, which are a highly efficient market that trade by well-
informed individuals and institutions trader. The other segment is consisting of less-well-informed small investors’ trader, where information is asymmetrically
distributed.
2.1.6 Google Trends
According to WhatIs.com, the definition of Google trend is an online search tool that allows the user to see how often specific keywords, subjects and
phrases have been quires over a specific period of time. The result called as “search volume index” that displayed in graph. The data can be save as .csv file
and opened in excel http:whatis.techtarget.com. Google trends is similar with Google Insight, according to Scheitle 2011 this search tool will provide data on
the relative frequency of search terms entered by Google users across time and presence of imperfect or bad i
i nf
nf o
ormation. This is the
e th
theory where there are two kin ds
ds of investors, informed
investor and d
u ninformed invest
st or
r s.
s I
I t ca
ca n
n gi
g ve
ve unequally con
n di
d tion because the
inform m
e ed investor ca
a n
n ha
ha ve
ve more information an
d d kn
kn ow
ow le
dge that can n
g g
ive them a be
e t
tter und d
er erst
stan an
d d
and re re
s su
l lt
in decision making to
d d
o o
invest tme
me nt
nt as state
d d
in web source
e s
s h htt
tt p:
w ww
w.in ve
stinganswers .c
om. It’s supported d b
b y
y Ro
R se
se ,
Pe Pete
t r S.
and Ma
Ma rq
r i
uis, M M
il ton H. 20
08 that in
th e
real wor d
th ere is no
m market
et t tha
ha t eith
e er
co co
mp m
lete te
ly efficient or completely
asy mmetri
c, this book split
t t
he h
r rea
eal l
wo w
rld d
market t
i nto two
se gm
en ts, whic
h are
a high
ly efficient
m arket that t
ra ade by we
e ll
ll -
inform m
ed individuals and
i ns
titu ti
ons trad er
. Th e
other segment is co
onsistin ing of
of less-w
we el
l-info rm
ed s
s ma
ma ll
ll i
i nv
nv es
es to
t rs’ trader, wh
wh er
er e
e in
in fo
fo rm
r atio
n is
a sy
y m
mmetrica a
ll l
y y
distributed.
2. 2.
1. 1.6
6 Goog
l le
T Tre
e nd
nd s
s
Ac A
cord d
in in
g g to WhatIs.com,
m, the def efinition of Goo
o gl
gl e
e trend
d i
i s
s an online search tool that allows the user t
to see how often specific keywords, subjects and
phrases have been quires over a
a specific c
period of time. The result called as “search volume index” that display
y ed
e in
n graph. The data can be save as .csv file and opened in excel http:whatis tech
ch target com Google trends is similar with
d
23 geographic units. Scheitle 2011 also explain that the number of searches within
a particular ecological case e.g., a state for a particular term or group of terms during a time period is determined and then will be normalized. Google.com
define that the result in Google Trends are normalized to make it easier in comparing the search data and cancel out the variable’s effect on the data.
Normalized means sets of search data are divided by common variable such as total search. Without normalized, region with the most search volume would
always rank highest https:support.google.com. Scheitle 2011 also explain that the search that have highest rate with the “search term” will give a score of
100, the scale is from 0-100. These data are obviously based on the population using the Internet or, more precisely, the population of Internet users conducting
searches on Google. The researcher interested to use the search volume index from Google
trends as the direct proxy for attention because from the search volume index we can see the frequency for a term that searched by the people, its supported by
scheitle 2011 that if people are concerned or interested in a particular issue, they will be more likely to search for resources, news, websites, discussion boards, and
other types of information related to that issue. As interest goes up or goes down over time, these searches will increase or decrease as well.
during a time period is dete e
rm rm
i ined and t
he he
n n
will be normalized. Google.com define that the resu
su lt
lt in Google Trends are normal liz
iz ed
e to make it easier in
comparing th the search data an
n d
d ca
ca nc
nc el
el o
o ut
u t
t he
h variable’s ef
effe f
ct on the data. Normal
al i
ized means s se
ets s
of of
search data are div i
id id
ed ed
b b
y y
common var ia
ia ble such as
to o
ta tal search
ch . Wi
Wi t
thout no no
rm al
iz ed, re
gi on with
th th
e e
mo m
st s
s ea
earc rc
h h
volume e would
always ys
r r
an ank
k high gh
est h
tt ps:support.g
oo gle.com.
Sc he
it le
le 20 011
11 al
also so
exp plain
th h
at at
t t
h he sea
a r
rc h that have
hi ghest rate
w ith the “s
ea rch term”
wi i
ll ll
give ve
a a
score o of
10 100,
0, the
e s
ca le is from 0-100
. These
da ta are
obv iously based on
th the po
po pu
pu la
la tion
using t th
e Internet o
r, m
ore prec is
el y,
the p
op ul
ation of
Int ernet user
s s conducti
i ng
ng search
h es
on Google. The resear
ch h
er er
i i
nt nt
er er
es es
te te
d to use the e
s s
ea ea
rc rc
h h
vo vo
lu me
i nd
ex f
f ro
ro m
Goog og
le le
tr t
ends as the direct proxy for atten ti
ti o
on b b
ecause from the search volume inde ex
x we w
ca can
n se
see e
the frequency for a term that searched by the people, t
its s s
up uppo
po rt
rted ed
by sc
sche heit
i le
20 20
11 11
th th
at at
i i
f f
pe pe
o ople are
c c
on once
cern rned
ed or intere
e st
sted ed
i in a part
i icular i
i ss
ssue ue
, they will
b b
e e
mo m
re lik ik
el el
y y to search for re
resources, s, news, websites,
s d
d is
is cussio
o n
n bo
boards, and other types of information relate
ed to that iss sue. As interest goes up or goes down
r over time, these searches will incr
rease or d e
ecrease as well.
24
Figure 3 Graph of Google Trend for ASII stock ticker in Indonesia in the year 2012
Sources: www.google.ocm
Figure 4 Graph of Google Trend for “Ades” keywords in Indonesia in the year
2005-2012
source: www.google.com
Figure 5 Graph of Google Trend for “Ades” Regional interest search in Indonesia in
the year 2005-2012
Source: www.Google.com So
o ur
u ces: w
w w
ww .google.oc
m
Fi gu
re 4 Gr
r a
ap h of
G oo
gle Trend fo
r “Ade
s” key
wo rds in Indon
es ia in
the y y
ea ea
r r
2005 -2
012
source: www.google.com
Figure e
5 Graph of Google Trend for “A
Ades” Reg g
i ional interest search in Indonesia in
the year 20
005-2012
25
Figure 6 Graph of Google Trend for “Ades” Related searches terms in Indonesia in
the year 2005-2012
Sources: www.google.com
2.1.7 Liquidity
According to Bodie et al. 2008 liquidity is the speed and ease with which an asset can be converted to cash. It is a relationship between the time dimension
and the price dimension of an investment asset. Based on Investopedia http:www.investopedia.com definition of liquidity is the degree to which an
asset or security can be bought or sold in the market without affecting the assets price. Liquidity is characterized by a high level of trading activity. Assets that can
be easily bought or sold are known as liquid assets. Other definition is the ability to convert an asset to cash quickly which also known as marketability.
According to Rose, Peter S. and Marquis, Milton H. 2008 a liquid financial asset is readily marketable, which is mean that the assets can be sold
quickly. It is related to assets’ price and generally carries lower yields, stable price and reversibility. Liquidity can be measure by bid-ask spread, trading volume,
frequency of trades, and average trade size. Liquid instrument will have higher in trading volume, trading frequency, and average daily trade size.
So o
urces: w w
ww ww
.g go
oogle.co co
m m
2. .
1. 1.
7 7
Liqu qu
id it
y
A Ac
cording to Bodie et a
l. 2008
liquidit y
is the speed and e
as ase wi
wi th
th w which
h an asse
et can be co
nv er
ted to c as
h. It
is a rel
at io
nship be
tw een the ti
m me dimensi
i on
on and t
th e price dimensio
n of
a n invest
me nt
a sset. Based on I
n nvesto
o p
pedi a
http: :
ww w
w. in
ve st
op op
ed ed
ia ia
c .c
om om
definition of f
li li
qu qu
id id
it it
y y
is i
the d egree
to to
which a an
n asset or security can be bought or s
s ol
old d
in in
the market without affecting the as asse
se t
s pr
pric i
e. e
L L
iq q
uidity is characterized by a high level of trading activity. Ass ss
et ets th
that at c
can be
be e
e as
a ily
b boug
ht ht or
r so
so ld
ld a
re known wn
a a
s s
li liqu
quid id assets.
O O
th ther
e d d
f ef
i in
i it
i ion is t
t he
he a
a b
bility to con
n ve
ve rt an as
as se
se t
t to cash quickly y
which al also known as m
mar ar
ke k
ta bi
lity ty
. According to Rose, Pete
er S. and Ma
M rquis, Milton H. 2008 a liquid
financial asset is readily marketa able, whic
ch is mean that the assets can be sold quickly. It is related to assets’ price
a a
nd g generally carries lower yields, stable price
and reversibility Liquidity can be me m
asure by bid-ask spread trading volume
26 Wyss, Rico von 2004 also explain that liquidity measures are separated
into one-dimensional only one variable in one measure and multi-dimensional ones different variables in one measure. The one-dimensional liquidity measure
is separated into four groups such as: size of the firm, the volume traded, the time between subsequent trades or the spread.
According to Tripathy, naliniprava 2011 trading volume tends to be higher when stock prices are increasing; its changes reflect the available set of
relevant information perceived by the market. This research found significant contemporaneous relationship between return volatility and trading volume that
indicate the information may flow simultaneously rather than sequentially into the market. The study also found that trading volume is associated with an increase in
return volatility and this relationship is asymmetrical. The study revealed that shocks in stock returns impact trading volume in the expected direction over a
short horizon. According to Pathirawasam, C. 2011. Higher volume in the market leads to a shorter time needed for trading a predefined amount of shares.
So when trading volume is high this is a sign of high liquidity.
2.1.8 Return and Risk
According to McMillan et al. 2011 return is defined as the reward for undertaking the investment, it is the motivating forces in the investment process.
There are two components of return which are; yield that is the income component of a security’s return and second is capital gain loss which is the
change in price on a security over some period of time. ones different variables in o
o ne
ne measure. T
T he
he o
o ne-dimensional liquidity measure
is separated into four ur groups such as: size of the firm, t
t he
he volume traded, the time
between subs bs
equent trades or the he
s s
pr pr
ea e
d. d.
A According to
o T
T ri
r pa
p thy, naliniprava
20 2011
1 tr
trad a
ing volume t
t ends to be
hi i
g gher whe
hen n st
st oc
oc k pric
ic es
es a
re increasing; its
c ha
ng g
es es
reflect ct
t t
he he
availab b
le le
set of releva
a nt
nt i
i nf
nf orma
ma ti
on p er
ceived by th
e market. This res
ea a
rc r
h fo f
un un
d d si
si gnif
f ic
ic ant
co o
nt n
em po
ra a
ne ous relation
sh ip between return vola
ti li
ty and t ra
di d
ng v
v ol
olum u
e th hat
a in
indi di
c cate
t t
he information may
f low simultaneo
us ly
rather than seque n
ntiall lly
y in in
to to
the market
t .
Th e stud
y also
found tha t
tr ad
in g vo
lu me is as
so ci
ated with an
n increase in in
return volatility and this
r elatio
ns hip is a
sy mm
et rical. The study r
e evealed
d tha at
shoc ks
ks in stoc
k re
tu u
rn rn
s s
im im
pa pa
ct ct
trading volum um
e e
in in
t t
he he
exp ec
ted di
re e
ct ctio
ion over er
a a
short horizon. According to Path h
ir iraw
aw as
as am, C. 2011. Higher volume i
i n
n th
th e
ma mark
rket et
leads to a shorter time needed for trading a predefined amoun un
t t
of of
s sha
har res.
So So
w w
hen tr d
ad i
ing vo o
lu lume
me i
is high h
t t
hi hi
s s
is is
a a
s s
ig ig
n n
of hig
h h
li li
qu qu
id id
i ity.
2.1.8 Return and Risk
According to McMillan e et al.
201 11 return is defined as the reward for
undertaking the investment, it is th h
e e mo
o t
tivating forces in the investment process. There are two components of retu
u rn which are; yield that is the income
d
27 According to Drake, Pamela Peterson and Fabozzi, frank J. 2009 risk is
derived from Italian verb riscare which means “to dare”. Investors “dare to” get profits by taking advantage of opportunistic side of risk. According to
Damodaran, Aswath 2012 risk in finance is defined in term of actual return on an investment around an expected return, even when those returns represent
positive outcomes. According to McMillan et al. 2011 there are some sources of risk, such as:
a Interest Rate Risk: changes in the level of interest rate that resulting on the variability in security’s return.
b Market Risk: fluctuations in the overall market that makes variability in return.
c Inflation Risk: the chance that purchasing power of invested money will decline.
d Business Risk: the risk of doing business in a particular industry or environment
e Financial Risk: it is associated with the use of debt financing. The variability in the return getting larger if the proportion of asset
financed by debt is larger. f Liquidity Risk: this risk higher when the investment can’t be
sought or sold quickly. g Currency Risk: this risk face by all investors who invest
internationally related with the uncertainty of return after convert the foreign gains to the own currency.
profits by taking advantag ag
e e of opportu
u ni
ni st
st ic side of risk. According to
Damodaran, Aswat t
h h
2012 risk in finance is defined i
i n
n term of actual return on
d an investmen
ent around an expe e
ct t
ed ed
ret et
ur ur
n, n,
e e
ve v
n when those e
returns represent positive
ve outcomes. A Acc
ccor o
di d
ng to McMillan et al. l
2 2
01 01
1 1
there are som m
e sources of risk
sk, such a a
s: s
a In
In te
rest Rate Risk: changes in the l
ev el
l o o
f in i
te te
re re
st st
rate that
resulting on
the varia bi
li ty in secu
ri ty
’s return. b
Market Ris k:
fluctua ti
ons in t
he overall mar
ke e
t t
th hat
at m m
akes va
ri ab
il ity in ret
urn. c Inflation Ri
sk: th
e chance that purchasing power
of inve vested
d mo
ne e
y y
wi wi
ll ll
d d
ec ec
li l
ne. d Business Risk: the r
ris isk
k of
of doing business in a particular indu
dust st
r ry
or environment e
Fi Fina
a nc
nc ia
ial l
R Risk:
it it
i i
s s as
asso soci
ciat at
d ed wit
h h
th th
e e
us us
e f
of d
d b
ebt financ ncin
ing g. The
va va
ri riability in the
r r
eturn ge ge
tt ing larger if
f th
th e
e pr
p op
p or
or ti
ti o
on of asset financed by debt
is larger. f Liquidity Risk: th
this risk h
higher when the investment can’t be sought or sold quick
k ly
l .
g Currency Risk: this risk face by all investors who invest
28 h Country Risk: it political referred as political risk, this risk related
with economy stability. According to Jones, Charles P. 2009, Fabozi, Frank J. and Drake, Pamela
Peterson 2009 and McMillan et al. 2011 define that there are two risks that must be consider when investor deal with investment. The first is systematic risk,
risk that cannot be diversified no matter the investor does or it called nondiversifiable risk, such as interest rate, inflation, economic cycles, political
uncertainty, and natural disaster. Second is unsystematic risk, which is risk that can be eliminated by diversification or it called diversifiable risk.
Risk can be measure using variance and standard deviation. Variance is absolute measure of dispersion. Standard deviation is a measure of the dispersion in
outcomes around the expected value.
2.1.9 Relation between Investors’ attention with Liquidity
Da et al. 2009 discovered that Google search volume is closely related to the trading by individual investors. It shows the intense effect on the trading
behaviors of investors. According to Tripathy, Naliniprava 2011 trading volume and its changes described the available set of relevant information perceived by
the market. This research concludes that trading volume is related with the stock return volatility. High trading volume is related with high stock return volatility. It
is also define that news which received by the investors is give effect on the stock return volatility. Good news increasing the stock return volatility leads to increase
trading volume. According to Chae 2002 investor attention can be seen from the According to Jones, Ch
Ch ar
ar l
les P. 2009 09
, F
F abozi, Frank J. and Drake, Pamela
Peterson 2009 an n
d d
M McMillan et al. 2011 define th
h at
at there are two risks that
must be cons ns
i ider when investor
r dea
e l
l wi
wi th
th i
i nv
n es
es tment. The first
st i i
s systematic risk, risk tha
hat cannot b b
e e d
dive v
rsified no matter th
th e
e in
in v
vestor does or
o it called
no o
n ndiversi
i fi
fiab able
e risk, s
s uc
uc h
h as interes
t rate, inflat
io io
n, n,
econo nomi
mi c
c cycles,
po p
litical uncert
rt ai
aint nty,
y and
d n
at ur
al disaster. Sec
on d is unsystematic
ri risk
s , wh
wh ic
ic h
h is
is risk
k that
ca a
n n
be b
e limi
mi na
ted by div ersi
fication o r
it called diversifiable risk
. Ri
Ri sk
sk can
n b
e measure using
va riance
and stand
ar d deviation. Varia
n nce is
is a
a bs
bs ol
o ute
measur r
e of dispe
rs io
n. Standar
d de
vi atio
n is
a mea su
re of the d
dispersion i in
n outcom
m es around the expect
ed v al
ue .
2.1.9 Relation between Investor
s’ s’ at
t te
te ntion with Liquidity
Da et al. 2009 discovered that Google search volume is close se
ly ly rel
el at
ated ed
to th
th e
e tr
t ading
b by
i i
nd nd
iv iv
id id
ua ua
l l invest
stor or
s. s.
I I
t t sh
sho ows th
h e
in inte
te ns
n e
f ef
f fect on th
h e
e tr
r a
ading beha
vi vi
or or
s of
inv nv
es es
t tors. According
g to Tripa
a th
thy, Naliniprava a
20 20
11 tr
tr ad
ad in
ing volume and its changes described the av
vailable set of relevant information perceived by
the market. This research conclud des that tr
rading volume is related with the stock return volatility. High trading volum
me is r
related with high stock return volatility. It is also define that news which receive
d d by the investors is give effect on the stock
29 stock price that influenced the information that flow in the market. Information
itself can decrease the asymmetric information and make the stock more liquid. Here, there is positive relation between investor attention and liquidity.
2.1.10 Relation between Investors’ attention with Return and Risk
According to Ross et al. 2009 define that individual expects a stock to earn over next period is called expected return. According to Fama and French
1992 variables that can explain the average return is size and book to market equity and it is also the proxy of common risk factors in return. Investors want to
invest in investment is to get higher return and a low standard deviation risk. Ross et al. 2009 explain that return on any stock consists of two parts such as
normal or expected return and the uncertain or risky return on the stock. Normal return or expected return can be predict by investors depend on the information
that have by investors and bear on the stock. Uncertain or risky return on the stock is part that comes from information that will reveal within the month. Ashraf,
M.A and Joarder, H.R 2009 stated on their research that informed investors could be more advantageous than uninformed investors in averting risk. Risk is
related with uncertainty, according to Andre, Daniel and Hasler, Michael 2013 when investor pay attention to news the uncertainty will decrease and the
estimated growth rate is increasing and vice versa. In portfolio theory we learn about high risk high return, some investors
willing to invest their funds in high risk investment because they expected the high return from that investment. There is positive relation between risk and
Here, there is positive relation n
b b
t etween inves
s to
to r
r attention and liquidity.
2.1.10 Rela a
ti tion between Inves
s to
t r
r s’
’ at
t te
te nt
nt io
i n
n with Return an
nd d
Risk
A According to
o R
R os
o s
s et al.
2009 de fi
ne t
tha ha
t in
indi d
vidual expec c
ts t
a stock to ea
a r
rn over ne ne
xt xt p
p eriod is
is cal
led expected return. A
A cc
cc ording
g to
o Fa
Fa ma and
d French 1992
2 v
v ar
ari iables
es t
ha t
ca n explain th
e av erage return
i s si
ze ze
and d
b b
oo oo
k k
to t
mar arket
eq q
ui ui
ty and i i
t is also the pr
ox y of com
mo n risk fac
to rs in return
. In
I vest
st or
or s
s want
t to
in in
ve ve
st in
n in
vestment is to g et
highe r
re turn a
nd a low standard
de e
vi v
at t
io io
n n
r r
isk. Ross e
et a
l. 2009
ex pl
ain that ret
urn on
a ny
stock con sist
s of two p
parts such as as
norma al
or expected return an d
the uncertai
n or ris
ky return on the s to
ock. No Norma
al return
rn o
o r expect
ed r
et et
ur ur
n n
ca ca
n n
be b
predict by y
in in
ve ve
st st
or or
s s
de d
pe p
nd on
th e
e in
informat t
io io
n n
th t
at have by investors and bear on t t
he he s
s to
to ck. Uncertain or risky return on the
s sto
to ck
ck is
is p p
ar art
t that comes from information that will reveal within the mo
mo nt
nt h
h. A Ash
shr raf,
M. M.
A A
and d
J Joa
d rder,
, H. H.R
R 2
2009 s
s ta
tate ted
d on on t
t h
heir res s
ea ea
rc rc
h h
h th
t at
i i
f nformed
d in
in ve
vestors could
d be
be more ad
advantageous than n uninform
rmed investors i
i n
n av
av er
ti ng
ng r
r is
is k.
Risk is related with uncertainty, accordin
ng to Andre e, Daniel and Hasler, Michael 2013
when investor pay attention to o news th
he uncertainty will decrease and the estimated growth rate is increasing a
and vi vice versa.
In portfolio theory we learn a a
b bout high risk high return some investors
30 return. Stocks that high demand and supply will tend to be more fluctuate and
indicate that many investors interested on that stock. The fluctuation of stock price is describing the information that flow in the market. So there is a positive
relation between information that investors have with the return and risk of investment.
2.1.11 Indonesia Stock Exchange
Indonesia capital stock market was started in the year 1912 in Batavia nowadays known as Jakarta during the Dutch colonial era. It known as Batavia
Stock exchange or Jakarta Stock exchange JSC and it was use for the Dutch interest. It was re-active by the President Suharto on the August 10, 1997 and
supervised under the Bapepam as the capital Market supervisory Agency. On the July 16, 1989 Surabaya stock exchange was established and then merges with
Jakarta Stock exchange in the year 2007. The name changed becomes Indonesia Stock Market IDX. There are two equity trading systems, first is Jakarta
Automated Trading System JATS. Jats first launch in the year 1995 and renew on March 2, 2009. It uses to handle all financial products such as stocks, bonds,
and derivatives. Second are Order-Driven Market and Open-Auction System. This system is based on an order-driven market system where only limit orders with
day or session order duration are accepted. People who can trade in the exchange are the Only IDX Members who are already registered as the Members of the
Indonesian Clearing and Guarantee Corporation KPEI. price is describing the inform
m at
at io
ion that flow w
in in
the market. So there is a positive relation between inf
nf or
mation that investors have wit ith
h the return and risk of
investment.
2. .
1 1.11 Indo
do ne
ne si
si a
a Stoc c
k k
E Ex
change
In In
do do
nesi si
a a
ca pi
ta l stock market was started
i n
the ye
ye ar 191
912 2 in
in Bat
t av
a ia
n n
ow ow d
adays k kn
own as Jak ar
ta during the
Dutch colonial era. It kn
known n as
as Batav i
ia St
St oc
oc k
ex x
ch ange or Jakarta
St ock ex
ch ange JS
C and it was us
e fo
f r th
th e
e Du
D tch
h interest
t . It was r
e- ac
tive by th e
Pr es
id ent
Su harto on
the August
10 0, 1997 a
a nd
nd superv
v is
ed under the Bapep am a
s the capi
ta l
Mark et supervisory Age
n ncy. O
O n
n th e
e July
1 1
6, 6
1 98
9 Su
ra ba
ba ya
ya s
s to
to ck
ck exchange wa
a s
s es
es ta
ta bl
bl is
is he
h d
an d
th en
m me
erges wi w
th th
Jakarta Stock exchange in the year r
2 2
00 7.
7 The name changed becomes Indo
o ne
ne si
si a
St Stoc
o k
k Ma
M rket IDX. There are two equity trading systems, fir
r st
st i
is Ja
Jaka ka
rta Au
Au to
to mate
d d
T Tr
d ad
i ing
g Sy Sy
st st
em JA
A TS
TS. . Ja
Jats ts f
f ir
irst launc c
h h
in in
t t
h he year
19 1995 a
a nd
nd r
renew on M
M ar
ar ch
ch 2
, ,
20 20
09 09. It uses to han
n dl
d e all fi
i n
nancial products ts
s s
uc uc
h as s s
to to
ck cks, bonds,
and derivatives. Second are Orde er-Driven M
Market and Open-Auction System. This system is based on an order-driv
ven marke e
t t system where only limit orders with
day or session order duration are ac c
ce c
pt t
e ed. People who can trade in the exchange
are the Only IDX Members who are e
already registered as the Members of the
31
Figure 7 Indonesia Capital Market Structure
Sources: www.idx.co.id Indonesia Capital Market Structure as regulated by Law No. 8 Year 1995
concerning Capital Market
Table 2 Indonesia Stock Exchange trading hours on regular market
Day 1st Session
2nd Session
Monday – Thursday 09:00:00 to
12:00:00 WIB 13:30:00 to 15:49:59 WIB
Friday 09:00:00 to
11:30:00 WIB 14:00:00 to 15:49:59 WIB
Sources: www.idx.co.id So
So ur
ur ces:
: www
.idx.co.id Indo
o nesia Capita
l Ma
rket Str uc
tu re
a s re
gula ted by
L aw
N o. 8 Ye
ar r 1995
conc c
erning Capital Marke t
Ta Ta
bl b
e 2 Indonesia Stock Exchange t
t rading hours on regular market
Da Day
y 1s
1st t
S Session
2 2n
d d Sess
s io
io n
n
Mo Mo
nd nday
ay – Th Th
u ursday
09:0 0:00 to
12 :0
:00:00 WIB 13
3 :3
:30: 0:
00 00
t t
o o
15 15
:4 :49:
9:59 WIB Friday
09: :00:00 to
11:3 0:00 WIB
14:00:00 to 15:49:59 WIB Sources: www.idx.co.id
32 Pre-opening schedule
Time Agenda
08:45:00 - 08:55:00 WIB The Exchange Members input the buying and
selling orders. 08:55:01 - 08:59:59 WIB
JATS processes the pre-opening price forming and allocates every done transaction.
Sources: www.idx.co.id Pre closing and post trading session
Session Time
Agenda
Pre-Closing 15:50:00 - 16:00:00
WIB The Exchange Members input the
buying and selling orders without the bid-ask information displayed.
16:00:01 - 16:04:59 WIB
JATS processes the pre-closing price forming and allocates every
done transaction. Post-Trading
16:05:00 - 16:15:00 JATS processes the allocates
transaction with closing price. Sources: www.idx.co.id
2.1.12 India Stock Exchange
National Stock Exchange of India NSE was promoted by leading Financial Institutions at the behest of the Government of India and was
incorporated in November 1992 as a tax-paying company and recognized as a stock exchange on April 1993. The National Stock Exchange NSE operates a
nation-wide, electronic market, offering trading in Capital Market, Derivatives Market and Currency Derivatives segments including equities, equities based
derivatives, Currency futures and options, equity based ETFs, Gold ETF and 08:45:00 - 08:55:00 WIB
B The Ex
ch ch
an an
ge g
Members input the buying and se
se lling orders.
08:55:01 - 08 08
:5 :59:59 WIB
JATS processes the pre e
- -
op o
ening price forming and allo
lo cates every do
one n
transaction. Sources: w
www.idx.c co
o.id id
Pre cl closing an
n d
d po
p st trading
g s
s es
es si
si on
on
Se Se
ss ss
io io
n Time
Agen nda
da
P Pre
e -Clos
os i
in g
15 :50:00 - 16:0
0: 00
WIB The
Ex change
M M
embe be
rs s
i i
np n
ut t he
h bu
yi ng and selli
ng g ord
der er
s s
withou u
t t
th e
bid-ask inform at
ation di di
sp spla
layed. 16:00:01
- 16
:0 4:
59 WI
B JATS pr
oc esses the
p pre-cl
l osing
g pric
e fo rming and al
lo o
ca c
tes eve ery
y done transacti
o on.
Po Po
st -Tr
ad in
g 16
16 :0
:0 5:
5: 00
00 - 16:15:00
JA JA
TS TS
p p
ro cesses t
he e
a a
ll llocates
s tr
tr an
an sa
sa ct
ct io
io n
n wi w
th closing price
ce .
So S
urces: www.idx.co.id
2. 2.1.
1 12 12 India Stoc
oc k
k Ex
Exch h
an an
ge ge
Na Na
ti ti
on on
l al Stock Exchange
e of Ind
ndia NSE was pro mo
mo te
te d
d by leading Financial Institutions at the b
behest of t the Government of India and was
incorporated in November 1992 as a tax
x -paying company and recognized as a
stock exchange on April 1993. The e
Na ational Stock Exchange NSE operates a
33 Retail Government Securities. Today NSE network stretches to more than 1,500
locations in the country and supports more than 2, 30,000 terminals. Trading on the equities segment takes place on all days of the week
except Saturdays and Sundays and holidays declared by the Exchange in advance. The market timings of the equities segment are:
Table 3 India Stock Exchange trading hours
A Pre-open session
Order entry modification Open : 09:00 hrs
Order entry modification Close :
09:08 hrs
with random closure in last one minute. Pre-open order matching starts immediately after close pf pre-open order entry.
Sources: www.nseindia.com B Regular trading session
Normal Retail Debt Limited Physical Market Open :
09:15 hrs
Normal Retail Debt Limited Physical Market Close :
15:30 hrs
Block deal session is held between 09:15 hrs
and 09:50 hrs
Sources : www.nseindia.com
C The Closing Session is held between 15.40 hrs and 16.00 hrs
2.2 Previous Research
According to Barber and Odean 2008 attention is a scare resource. First, select the option to consider then decide which option to choose is the process in
making decision. This research was test that individual investors are often ignored options that do not attract attention and decide to buy or sell options that catch the
Trading on the equit t
ie ie
s s segment ta
ta ke
ke s
s place on all days of the week
except Saturdays a
and Sundays and holidays decla a
re re
d by the Exchange in advance. The
he market timings of of
the h
e e
qu qu
it it
ie ie
s s
se e
gm gm
ent are:
Table 3 India Stock Ex
ch ange trading
h ou
ours
A A
Pr Pr
e-op op
en session
Or Orde
der en en
try modifica ti
on Ope n :
09:0 hr
s
O Order
en try
mo dification C
lo se
:
09 :08
hr s
with h
ra ndom
c losu
re in la st
one min ut
e. Pre-op en
o rder m
at t
ching star arts
s imme
e di
ately after close pf
p re
-op en ord
er e
ntry .
So S
urce e
s: www.nseindia.com B
B Re
gular tr ad
d in
in g
g se
ss io
io n
n Normal Retail Debt Limited
d Physical Market Open :
09:15 hrs
No No
rm rm
al Retail Debt Limited Ph
Ph ys
ys ic
ic al
al M
M ar
ar ke
ke t
t Cl
Cl os
os e
e :
:
15:30 hrs
Bl Block deal sessi
si on
on i i
s held betwe
ween en
09:1 :15
5 hr hr
s and 09:50 hr
hrs s
So o
ur ur
ce es
s :
: ww
www. w.
n ns
ei nd
nd i
ia.com
C The Closing Session is hel
el d between
n 15.40 hrs and 16.00 hrs
2.2 Previous Research
According to Barber and Ode an
an 2008 attention is a scare resource. First,
34 investors’ attention. There are two kinds of investors which are informed investor
that observed the same signal weather want to buy or sell and uninformed investor that make a random purchase or random sales. This research was used indirect
proxies to measure the investors’ attention such as : news, unusual trading volume, and extreme returns. The researcher also stated that trading volume is
greater when news about a firm a reach investors and the important news often result in significant positive or negative returns. Barber and Odean 2008 explain
that investors are overconfident about the quality of their information that makes them trade too much. Information is needed to do investment but we have to make
sure that we use the appropriate information. Such investors’ trades sub optimally because they may overvalue the importance of events that catch their attention.
This research was concluding that when alternatives are many and search cost high, attention may affect choice decision that preferences.
According to Da et al. 2009 extreme returns, trading volume, news and headline, and advertising expense are indirect proxies for investor attention but
return can be driven by factors unrelated to investor attention and news doesn’t guarantee unless investor actually read it. This research proposes a direct measure
of investor attention using search frequency or search volume index SVI in Google. The reason is because internet users commonly uses search engine to
collect information and Google continues to become the favorite of the search engine. Da et al 2009 discovered that Google search volume is closely related to
the trading by individual investors. It shows the intense effect on the trading behaviors of investors. Search volume index is able to capture public attention
that make a random purchas s
e e
o or random sa
a le
le s.
s This research was used indirect
proxies to measur r
e e
the investors’ attention such as :
: news, unusual trading
volume, and d
extreme returns. T T
he e
r r
es es
ea ea
rc rc
he h
r al a
so stated that t t
t rading volume is
greater r
when news ab ab
ou ou
t a firm a reach investo t
rs rs
a and
nd the important nt news often
re e
s sult in si
i gn
gn if
ific ca
ant posi si
ti tive
or negative returns.
Ba a
rb rb
er e
and d O
Ode de
an an 2008
explain that i
i nv
nv es
es to
to rs a
re re
o verc
on fident about the quality of their
in info
f rmat
t io
io n
n th th
at m m
ak a
es t
th h
em em
t trade t
t oo
much. Information is need
ed to do i
nv estment bu
t t
we w
h hav
av e
e to mak
ke su
su re
re that
t we
use the appropr ia
te infor ma
tion. Su ch
investors’ trade s
sub op
opti ti
ma m
lly becaus
s e
they may ove
rvalue the imp
or tanc
e of event
s th
at catch t he
eir attention on
. This r
r es
earch was conclu di
ng tha
t when alt
ernati ves are many and
search h
cos st
high h
, at
at te
ntion ma y
y af
af fe
fe ct
ct ch
ch oi
oi ce
c decision that
at p
p re
re fe
fe re
re nc
nc es
. According to Da et al. 200
09 9
ex ex
t treme returns, trading volume, new
w s
s an
and d
he head
adli li
ne ne
, ,
and advertising expense are indirect proxies for investor at at
te tent
nt io
ion n b
but re
re tu
turn r
can b
be d
dr i
iven en
by by
f factors u
u nr
nr el
elat at
ed ed
t t
o invest
st or
or a att
tt en
ti tion a
d nd new
w s
s do do
esn’t guaran
an te
te e unle
e ss
ss i
i n
nvestor actually y
read it. T
This research pr r
op op
os o
es a di di
re rect measure
of investor attention using sear r
ch frequen
n cy or search volume index SVI in
Google. The reason is because in
i ternet u
u se
rs commonly uses search engine to collect information and Google con
ontinu u
es to become the favorite of the search
engine Da et al 2009 discovered that at
Google search volume is closely related to
35 that is not capture by news; it is capturing the demand for attention or active
attention on a real time basis. Investors can be search information in Google using company ticker or company name. This research examines weekly SVI of
Russell 3000 individual stocks from January 2004 to June 2008 for individual investors. In this research, individual investors are more active to search
information when they tend to buy stock because they have to choose from so many alternatives and it will push up stock price temporarily.
Bank, M., Peter, George. 2011 conducted a research about investor attention that using Google search volume as the direct proxy and study the
implication for trading activity, liquidity, and returns of German stocks. This research found that search volume is a powerful measure for investor attention
especially uninformed investor. The higher the search volume will increase the trading activity, improve liquidity stock and high future return in short run. This
research using company name that took from Thomson reuter data streams as the keyword search to get data of Google search volume index.
Usman, B. 2012 conducted a research about the Investor attention using Google search traffic and its influence on return, liquidity, and volatility of stock
return for manufacturing firm in Indonesia. This research concludes that Google search volume reduces the asymmetry information between informed and
uninformed investors. High search of information help investors make decision that impact on liquidity improvement, and the increasing liquidity affect the
volatility returns. Below is the summary of previous research:
using company ticker or comp mp
a any name. Th
This is
research examines weekly SVI of Russell 3000 indiv
v id
idual stocks from January 2004 to Ju
J ne 2008 for individual
investors. I I
n n
this research, i i
n ndiv
iv id
id ua
ua l
l in
in ve
e st
s ors are more
active to search inform
m a
ation when the he
y y
te te
n nd to buy stock becaus
se e th
th ey
ey have to cho
oos o
e from so ma
many alter r
na nati
tive ve
s s and it
it w
w i
il l
pu sh up st
oc k pric
e te
mp mporarily.
y Ba
Ba nk
n , M.
M. ,
Pe ter, George.
20 11 conducte
d a
re e
se s
arch h
a a
bo bo
ut ut
inve estor
at t
te te
nt t
i ion th
h at
using Goo gl
e search vol
ume as t he
direct pr ox
xy y
an n
d d st
st udy th
he im
im pl
pl icat
t i
io n
for trading acti vi
ty, liqu id
ity, and r
eturns of Germ an
n sto ock
cks. s.
This researc
ch found tha
t se arch vol
um e is
a p
ow erful me
as ur
e for inve st
stor attenti i
on on
especi i
al ly uninformed inve
stor. Th
e higher the search volume will
i increase
se the he
trad d
in in
g g
acti vity
, im
pr pr
ov ov
e e
li li
qu qu
id id
ity stock and hi hi
gh gh
f f
ut ut
ur ur
e e
re tu
rn i
n sh
or ort
t run. T T
hi hi
s s
re r
search using company name that t
t o
ook k f
from Thomson reuter data streams a as
s th
th e
ke keyw
yw or
or d search to get data of Google search volume index.
Us U
man, B
B. 2
2 01
01 2
2 condu ct
cted ed a
a r
res es
ea earch ab
b ou
ou t
t th
the e I
Inve t
stor atten n
ti tion
on u
using Goog
g le
le search tr
tr af
af fi
fic and its influ luence on
r return, liquidity,
y a
a nd
n v
ol at
at il
il it
ity of stock return for manufacturing firm in
n Indonesia. .
This research concludes that Google search volume reduces the as
s ym
y metry
information between informed and uninformed investors. High search
h of in
nformation help investors make decision that impact on liquidity improvement
n and the increasing liquidity affect the
36
Table 4 Summary of previous research
AuthorS Variables
Results
Barber, B.M. and Odean, T. 2008, “all that glitters: the
effect of attention and news on the buying behavior of
individual and institutional investors”, Review
of Financial Studies
, Vol. 21 No. 2, pp. 785-818.
Abnormal trading volume
Return News
Investors display attention driven buying behavior.
Da, Z., Engleberg, J., Gao, P. 2009. In Search of
Attention. The Journal of
Finance. Google search
volume
Returns of IPO stocks
Google search volume is captures the active attention
of retail investors. The change in search
volume is related to trading behavior of investors.
Increasing of search volume temporary will push up
stock prices.
Bank, M., Peter, George. 2011. Google Search Volume
and Its Influence on Liquidity and Returns of German Stocks.
Financial Market Portfolio Management
. Pp239-264 Google search
volume
Returns Liquidity
Search volume primarily measure attention from
uninformed attention. Increase in search volume is
associated with temporarily higher future returns.
Usman, B. 2012. “pengaruh google search trafic terhadap
return, likuiditas dan volatilitas return saham studi empiris:
perusahaan sektor manufaktur di bursa efek indonesia”.
Universitas Gajah Mada. Thesis
Google search volume
Return Liquidity
Return Volatility Google search volume
reduces the asymmetry information between
informed and uninformed investors.
High search of information help investors make decision
that impact on liquidity improvement, and the
increasing liquidity affect the volatility returns.
AuthorS V
Variable s
s Results
Barber, B.M. and Ode e
an an, T.
2008, “all that gl gl
it itters: the
effect of attentio o
n n and news on
n the buying
ng behavior of f
individual al
and i
i ns
ns ti
ti tu
tu ti
t onal
investor or
s” , Review
of Fina
a n
ncial Stud d
ie ie
s , Vo
l l. 21 No
o .
. 2,
, p
pp. 785 -
- 81
81 8.
8 Abnormal
trading volume
Re Re
tu t
rn rn
News Investors display attention
dr dr
iv iv
en buying behavior.
Da, Z. Z.,
, En
Engleb er
er g,
J .,
Gao, P.
20 200
09. In Sear
ch of
At At
te te
nt t
i ion.
The Journal of Fi
Fi na
nan nce.
Go og
le search volu
me Re
tu rn
s of IPO stoc
ks Goog
le le searc
c h
h vo
vo lume
e is captures
t t
he h
act ct
iv iv
e e attent
t io
io n
of retail in ve
vestors. s.
The chan ge
e i
in n
s search
h volume is re
la a
te t
d to
to t t
ra ra
ding behavior o
f in
ve estors.
s In
crea sing of
se a
arch volum me
e te
mporary wi ll
push up
p stock prices.
Bank nk
, M.
, Pe
te e
r, r,
G G
eo eo
rg rg
e. e.
2011. Google le
S S
ea ea
rc rc
h h
Vo Vo
lu lu
me me
and Its Influence on Liquidity an
n d Returns of German Stocks.
Fi Fina
na nc
nc ia
ia l Market Portfolio
Ma Ma
na nage
ge me
me nt
. Pp
Pp 23
23 9
9- 26
26 4
4 Google
s s
ea ea
rc rc
h h
vo volume
e Returns
Li L
quidit t
y y
Se Se
ar a
ch v
ol um
e e
primar ar
il ly
y me
me as
as ur
ur e
e at
tention fr
fr om
om uninformed attention.
Increase in search vol olum
m e
e is
associated with h
te temp
mp or
or ar
ar ily
hi hi
gh gher
f f
ut uture
e re
re tu
tu rn
rns s.
Us Usm
man, B. 2
2 01
01 2
2. .
“p “p
en engaruh
go o
og ogle
le s s
ea ea
rc rc
h h
tr traf
afic t t
e er
h hadap
p return
n ,
li li
kuidit t
as as
d dan volatilitas
return saham studi empiris: perusahaan sektor manufaktur
di bursa efek indonesia”.
Universitas Gajah Mada. Thesis
Go Goog
og le
le search h
volu lum
me R
Return Liquidity
R Return V
Volatility Go
Goog ogl
le search vo volume
re re
duce ces
s th
th e
e a
as ym
ymmetry inform
m at
at io
i n
between informed and uninformed
investors. High search of information
help investors make decision that impact on liquidity
improvement, and the increasing liquidity affect
the volatility returns
37
2.3 Hypotheses
Kategori