Value at risk, market risk and trading activity : CAPM alternative model

The purpose of this research is try to create Capital Asset Pricing Model (CAPM) alternative model at Indonesia Stock Exchange (IDX) that analyze the effect of the investment risk, trading activity and market multiple on stock return on low (IDR5 and IDR10), medium (IDR25), high (IDR50) and all tick size. This analysis focuses in (1) the relationship between return, VaR and market risk (2) the relationship between return, size and liquidity and (3) the relationship between return and PBV. We employ panel data model for data analysis. The research samples are active stocks of 12 sectors and members of LQ45 in 2004-2006 periods. The results of this research that VaR, beta, size, and liquidity positively related to stock return except the PBV. These findings indicate that VaR, market risk and trading activity are positively correlated to stock's return; however the fundamental performance is not relevant with trading activity at lower price, especially. These results support the previous researches which are done by many scholars, and give opportunities to VaR build alternative CAPM model. -- value-at-risk ; asset pricing ; size ; liquidity ; price-to-book value.