ANALYSIS OF MARKET RISK, FINANCIAL LEVERAGE, AND FIRM SIZE TOWARD STOCK RETURN ON NON-BANKING COMPANIES LISTED IN LQ45 INDEX OF IDX

Abstract

In the world of investment, one underlies the decision of investors is stock returns that are depend on many factors. The purpose of this study was to analyze the effect of Market Risk, Financial Leverage, and Firm Size to Stock Return. By counting these factors, investors can see the effect of stock returns are important in decision making. The research methods associative with regression analysis and classical assumption techniques that include normality, multicollinearity, heteroscedasticity, and autocorrelation. Samples are 36 non-banking companies in LQ45 index during the period 2010-2012. Purposive sampling technique used to obtain a sample in accordance with the purpose of research. This study used cross section data with 108 observation period. The results showed Firm Size and Market Risk have significant effect on Stock Return, while Financial Leverage has no significant effect on Stock Return. To conclude, investors need to pay attention to the growth and asset quality, as well as the risks to be faced by a company as a consideration in investing their funds in order to invest in the right and profitable companies.

Keywords: market risk, financial leverage, firm size, stock return