Magic Formula: Sebuah Tinjauan dalam Prediksi Perusahaan-Perusahaan Unggulan di Indonesia

https://doi.org/10.35912/jakman.v4i2.1293
Published: Mar 8, 2023

Abstract:

Purpose: This study aimed at investigating the performance of a value investing strategy called the “Magic Formula”, introduced by Joel Greenblatt (2006), applied to the Indonesian Stock Exchange. Magic Formula is a simple stock selection strategy by ranking stocks based on calculating Return on Capital and Earnings Yield.

Methodology: First, this study examined stocks listed on the Indonesia Stock Exchange represented by the Kompas 100 index measuring the price performance of 100 stocks that have good liquidity and large market capitalization. This step was followed by eliminating finance stocks because they have different debt postures which will affect the calculation in the next stage. The next step was to choose the top thirty stocks from the combined rank to become a portfolio. Portfolio rebalancing is conducted annually. Sharpe, Treynor, and Jensen’s Alpha analysis were used to measure returns adjusted for risk.

Results: This study showed that using return on capital and earnings yields can produce higher average returns than the market index from April 2015 to April 2019. The Magic Formula portfolio yields an average return of 12.76% and the market produces average returns of 6.89% during the period under test.

Limitations: The obtained data were derived from 5 years-data of the Indonesia Stock Market. in order to neglect the Efficient Market Hypothesis, the collection of wider data was required. besides, the result of this study is unusable to test the Efficient Market Hypothesis at weak or strong level.

Contribution: This study contributes empirical evidence that the Magic Formula is a solid investment model especially considering its simplicity. Magic Formula can be used as an early stage in the process of selecting a company to invest in.

Keywords:
1. Value Investing
2. Magic Formula
3. Earning Yield
4. Return on Capital
5. Investment Strategy
Authors:
1 . Ni Luh Putu Uttari Premananda
2 . Md. Yudyantara Risadi
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How to Cite
Premananda, N. L. P. U., & Risadi, M. Y. (2023). Magic Formula: Sebuah Tinjauan dalam Prediksi Perusahaan-Perusahaan Unggulan di Indonesia . Jurnal Akuntansi, Keuangan, Dan Manajemen, 4(2), 87–99. https://doi.org/10.35912/jakman.v4i2.1293
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Issue & Section
Vol. 4 No. 2 (2023): Maret
Articles
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References

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    Blij, R.H., (2011). Back-Testing Magic, An Analysis of The Magic Formula Strategy. Master Thesis. Universiteit Van Tilburg.

    Bodie, Kane, and Marcus. (2013). Investment. New York: McGraw-Hill.

    Cakranegara, P. A. (2021). Investasi hijau: mengintergrasikan faktor enviromental, social dan governance dalam keputusan investasi. Jurnal Akuntansi, Keuangan, Dan Manajemen, 2(2), 103-114.

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    Darmawan, J., & Roba’in, H. (2022). Pengaruh Keberagaman Gender dan Pengungkapan Risiko Terhadap Efisiensi Investasi. Goodwood Akuntansi dan Auditing Reviu, 1(1), 29-47.

    Davydov, D., Tikkanen, J., & Äijö, J. (2016). Magic Formula vs. Traditional Value Investment Strategies in the Finnish Stock Market. NJB, 65(3), 38–54.

    Degutis, A., & Novickyt?, L. (2014). the Efficient Market Hypothesis: a Critical Review of Literature and Methodology. Ekonomika, 93(2), 7–23.

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    Hesniati, H., Ogawa, A.Y., Clarence, A., Topher, C., Engelina, J. (2022) Pengaruh Inflation, Interest Rate, dan Exchange Rate terhadap IHSG di Bursa Efek Indonesia pada Tahun 2022-2021. Studi Ilmu Manajemen dan Organisasi, 3(1), 261-271.

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    Hongratanawong, L. (2014). The Study of the Magic Formula for Thailand and U.S. Stock Markets. The Journal of American Business Review, 3(1), 1–12.

    Jannah, M., & Imansyah, F. (2019). Analisis Strategi Investasi Magic Formula pada Bursa Efek Indonesia. Jurnal Riset Akuntansi Dan Keuangan, 7(2), 241–252.

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    Yanti, N. R., Komalasari, A., & Andi, K. (2022). Pengaruh Profitabilitas, Leverage, dan Struktur Modal terhadap Nilai Perusahaan dengan Kebijakan Deviden sebagai Variabel Moderasi. Goodwood Akuntansi dan Auditing Reviu, 1(1), 49-65.

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  1. Ashoka, M.L., Keihani, H.R. (2020). Factors Influencing the Investors to Invest in Stock Market. International Journal of Management (IJM), 11(1), 166-175. http://www.iaeme.com/IJM/issues.asp?JType=IJM&VType=11&IType=1
  2. Berman, Y., & Berman, R. (2017). The Impact of Time Horizon on the Effect of Diversification. SSRN Electronic Journal.
  3. Blij, R.H., (2011). Back-Testing Magic, An Analysis of The Magic Formula Strategy. Master Thesis. Universiteit Van Tilburg.
  4. Bodie, Kane, and Marcus. (2013). Investment. New York: McGraw-Hill.
  5. Cakranegara, P. A. (2021). Investasi hijau: mengintergrasikan faktor enviromental, social dan governance dalam keputusan investasi. Jurnal Akuntansi, Keuangan, Dan Manajemen, 2(2), 103-114.
  6. Coval, J. D., Hirshleifer, D. A., & Shumway, T. (2005). Can Individual Investors Beat the Market? SSRN Electronic Journal, 04.
  7. Darmawan, J., & Roba’in, H. (2022). Pengaruh Keberagaman Gender dan Pengungkapan Risiko Terhadap Efisiensi Investasi. Goodwood Akuntansi dan Auditing Reviu, 1(1), 29-47.
  8. Davydov, D., Tikkanen, J., & Äijö, J. (2016). Magic Formula vs. Traditional Value Investment Strategies in the Finnish Stock Market. NJB, 65(3), 38–54.
  9. Degutis, A., & Novickyt?, L. (2014). the Efficient Market Hypothesis: a Critical Review of Literature and Methodology. Ekonomika, 93(2), 7–23.
  10. Graham, B., & Dood, D. (1934). Security Analysis. The McGraw-Hill Companies,Inc.
  11. Graham, Benjamin. (1949). The Intelligent Investor. Harper & Row Publishers Inc, New York.
  12. Greenblatt, J. (2006). The Little Book that Beats The Market. John Wiley & Sons, Inc.
  13. Gupta, E., Preetibedi, P., & Mlakra, P. (2014). Efficient Market Hypothesis V/S Behavioural Finance. IOSR Journal of Business and Management, 16(4), 56–60.
  14. Gustavsson, O., & Strömberg, O. (2017). Magic Formula Investing and The Swedish Stock Market. Lund University.
  15. Hesniati, H., Ogawa, A.Y., Clarence, A., Topher, C., Engelina, J. (2022) Pengaruh Inflation, Interest Rate, dan Exchange Rate terhadap IHSG di Bursa Efek Indonesia pada Tahun 2022-2021. Studi Ilmu Manajemen dan Organisasi, 3(1), 261-271.
  16. Hofmann, W., Baumeister, R. F., Förster, G., & Vohs, K. D. (2012). Everyday temptations: An experience sampling study of desire, conflict, and self-control. Journal of Personality and Social Psychology, 102(6), 1318–1335.
  17. Hongratanawong, L. (2014). The Study of the Magic Formula for Thailand and U.S. Stock Markets. The Journal of American Business Review, 3(1), 1–12.
  18. Jannah, M., & Imansyah, F. (2019). Analisis Strategi Investasi Magic Formula pada Bursa Efek Indonesia. Jurnal Riset Akuntansi Dan Keuangan, 7(2), 241–252.
  19. Juli, A. G. (2016). Backtesting the Magic Formula in the Brazilian Stock Market Backtes. University of Gothenburg.
  20. Kok, U.-W., Ribando, J., & Sloan, R. (2017). Facts about Formulaic Value Investing. Financial Analysts Journal, 73(2), 81–99.
  21. Kuhn, Thomas S., The Structure of Scientific Revolution, Leiden: Instituut Voor Theoretische Biologie, 1962.
  22. Larkin, P. J. (2011). Can Individual Investors Capture The Value Premium? Journal of Business & Economics Research (JBER), 7(5), 25–34.
  23. Liviani, R., & Rachman, Y.T. (2021). The Influence of leverage, sales growth, and dividend policy on company value. International Journal of Financial, Accounting, and Management, 3(2), 165-178.
  24. Mabhunu, M. (2004). The Market Efficiency Hypothesis and the Behaviour of Stock Returns on JSE Securities Exchange. Rhodes University.
  25. Malkiel, B. G., & Fama, E. F. (1970). Efficient Capital Markets: A Review of Theory and Empirical Work. The Journal of Finance, 25(2), 383–417.
  26. Montier, J. (2009). Value Investing: Tools and Techniques for Intelligent Investment. Wiley.
  27. Njanike, E. (2010). Is the South African Stock Market Efficient? Meam Reversion on the JSE. University of Cape Town.
  28. Persson, V., & Selander, N. (2009). Back testing “The Magic Formula” in the Nordic region. Stockholm School of Economics.
  29. Postma, P. P. M. (2015). Magic Formula investing in the Benelux. Tilburg University.
  30. Preet, S., Gulati, A., Gupta, A., & Aggarwal, A. (2021). Back testing Magic Formula on Indian Stock Markets: An Analysis Of Magic Formula Strategy. Paideuma Journal of Research, XIV(10), 1–10.
  31. Ritter, J. R. (2003). Behavioral finance. Pacific Basin Finance Journal, 11(4), 429–437.
  32. Sahdiah, F, H., Komara, E,F. (2022). Penggunaan Arbitrage Pricing Theory untuk Menganalisis Return Saham pada Perusahaan Sub Sektor Perbankan yang Terdaftar di Bursa Efek Indonesia (BEI) Periode 2015-2021). Reviu Akuntansi, Manajemen, dan Bisnis, 2(1), 1-13.
  33. Shiller, R. (2003). From Efficient Markets Theory to Behavioral Finance. Journal of Economic Perspectives, 17(2), 83–104.
  34. Siswantoro, Siswantoro. (2020). Efek Diumumkannya Kasus Pertama Covid-19 terhadap Harga Saham dan Total Saham yang Diperdagangkan. Jurnal Akuntansi, Keuangan, dan Manajemen, 1(3), 227-238.
  35. Szyszka, Adam. (2007). From the Efficient Market Hypothesis to Behavioral Finance: How Investors' Psychology Changes the Vision of Financial Markets. The Icfai Journal of Finance, 2(1), 68-76.
  36. Sunendar, J. (2019). Cara Simple Berinvestasi di Pasar Modal. Pustaka Aura Semesta.
  37. Yanti, N. R., Komalasari, A., & Andi, K. (2022). Pengaruh Profitabilitas, Leverage, dan Struktur Modal terhadap Nilai Perusahaan dengan Kebijakan Deviden sebagai Variabel Moderasi. Goodwood Akuntansi dan Auditing Reviu, 1(1), 49-65.
  38. Ye, Y. (2013). Application of the Stock Selection Criteria of Three Value Investors , Benjamin Graham, Peter Lynch , and Joel Greenblatt?: A Case of Shanghai Stock Exchange from 2006 to 2011. International Journal of Scientific and Research Publications, 3(8), 1–7.