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ANALYSIS OF THE EFFECT OF FINANCIAL RATIOS AND
MACROECONOMIC VARIABLES ON THE COMPANY'S STOCK
PRICE ON THE IDX30 INDEX
INTRODUCTION:
The capital market is a market that trades long-term financial instruments such as
stocks, bonds, mutual funds, and others. Shares (stock) are the most popular financial
instrument, on the other hand, stock investment is chosen by many investors because stocks
are able to provide attractive returns (BEI 2019). The first thing that must be considered in
investing in stocks is the company's stock market capitalization, because stock market
capitalization indicates the overall price of shares owned by the company (Muttaqiena 2015).
Companies with large market capitalization generally have a high level of liquidity, which
can reduce the risk of bankruptcy of the company.
Exchange Stock Indonesia (IDX) has grouped company stocks into stock indices, to
make it easier for investors to choose the desired stocks. The stock indices grouped by the
IDX based on large market capitalization and high liquidity are KOMPAS100, LQ45, IDX30
and IDX80 indices. The stocks of large capitalized companies do not all have high stock
prices. Stocks with low prices can also be classified as large market capitalization stocks
because the number of shares circulating in the market is large. The launch of the IDX30
index on April 23, 2012 by the I D X is expected to be a benchmark for investors in
investing in stocks. According to the IDX, the companies listed on the IDX30 index reflect
the real market conditions in the capital market, so many local and foreign investors invest in
stocks. In addition, in May 2019 the international debt rating agency Standard and Poor's
upgraded Indonesia's long-term debt rating from BBB- to BBB with a stable outlook,
meaning that the higher a country's debt rating the better the country's economy. Indonesia's
upgraded debt rating reflects a relatively low risk of d e f a u l t , thus creating a positive
sentiment in the market where foreign investors are eyeing stocks.
shares of companies listed on the IDX30 index (Audriene 2019).
The existence of 30 companies listed on the IDX30 index will make it easier for
investors to choose stocks and monitor the performance of the company's shares, where the
number of companies listed is not large. The Indonesia Stock Exchange mentions that the
small number of IDX30 index constituents has the advantage of being easier to replicate the
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portfolio reference, and according to portfolio theory the number of 30 companies is the ideal
amount of asset diversification in a portfolio. The IDX30 index constituents are only 66.70%
of the LQ45 index but its market capitalization or one of its current assets is 91.00% of the
LQ45 index. In addition, the historical return of the IDX30 index calculated from its base
day, December 30, 2004 to April 30, 2012 is 259.05%, higher than the Bisnis27 and LQ45
indices (Warsito 2012).
Companies listed on the IDX30 and LQ45 indices are revised by the IDX every six
months. The IDX will remove companies that do not meet the predetermined criteria, so that
new companies that meet the criteria are included instead. The list of company stocks listed
on the IDX30 index is considered more stable than the LQ45 index, whose bottom five stocks
are always changing. In addition, the 30 stocks in the IDX30 index also represent the leading
stocks in each company sector (Taqiyyah 2012).
The existence of a stock price index can make it easier for investors to see the
performance of stocks in the market, because the indicator describes the movement of stock
prices in the capital market (Tandelilin 2017). When the stock price index is sluggish or
declining, it indicates that the share prices of companies in the index are generally weakening
or decreasing, and vice versa. If we look at the performance of the IDX80 stock index since
its launch on February 1, 2019, it shows good performance. The movement of the share
prices of its companies shows an increase from
142.81 points in February 2019 to 143.96 in June 2019 (BEI 2019).
The movement of company stock prices in the IDX80 index cannot be fully used as a
benchmark in investing in stocks, because the history of stock price movements is still short
and the country's economic conditions are still stable, so it does not yet describe the real stock
price movements. In addition, companies that are consistently listed on the IDX80 index
cannot be known, because the IDX has only released the shares of companies listed on the
index once. The history of stock price movements in the IDX80 index cannot be compared
with the KOMPAS 100, LQ45 and IDX30 indices which have a history of high stock price
movements. Another thing is that the public and investors are not too familiar with the IDX80
index in the world of stocks.
Compared to the KOMPAS100 and LQ45 indices, the IDX30 index has a low stock
price index, because the companies incorporated in the IDX30 are not as many as in the
KOMPAS100 and LQ45 indices. However, in the period 2014-2018, the changes in the
movement of company stock prices in the IDX30 index were higher. The change in the
movement of company stock prices in the IDX30 index amounted to 49.24%, while the LQ45
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index amounted to 38.25% and the KOMPAS100 index amounted to 38.19%. This indicates
that the share prices of companies in the IDX30 index tend to experience a high speed in
increasing their share prices (m.investing.com 2019).
The many pros and cons of the formation of the IDX30 index have been refuted by
changes in stock price movements that are higher than the LQ45 index which is a constituent
of the IDX30 index. However, in 2015 and 2018 the movement of company share prices in
all stock indices on the Indonesia Stock Exchange decreased, including the IDX30 index.
This indicates that the share prices of companies listed on each index have generally
decreased. The movement of company stock prices in the IDX30 index for the 2014-2018
period is shown in Figure 1.
The line graph in Figure 1 shows that in 2015 the movement of company stock prices
in the IDX30 index decreased by
46.99 points, in 2018 experienced a significant decline of 52.34 points. The significant
decline in the share price of companies in the IDX30 index in 2018 was due to the Fed, the
Central Bank of the United States, increasing interest rates up to four times and followed by
an increase in Bank Indonesia (BI) interest rates which put pressure on the rupiah. The rupiah
weakened against the US dollar, which on October 11, 2018 touched the highest level of IDR
15 265 per US dollar (Bank Indonesia 2019). The above phenomenon shows that the
company's share price in the IDX30 index is thought to be influenced by interest rates and
exchange rates as factors that are beyond the company's control (macroeconomic variables).
The phenomenon of the Asian financial crisis in 1998 which was characterized by a
45% collapse of the JCI was caused by the rupiah exchange rate weakening from Rp2 382 per
US dollar in 1996 to Rp8 905 per US dollar in 2002. During these six years the exchange rate
touched Rp16 000 per one US dollar and the inflation rate went from 11.1% to 77.6%. The
phenomenon of the 2008 global financial crisis also caused stock prices in the capital market
to fall by almost 50% (Samsul 2015). This also shows that stock prices are thought to be
influenced by exchange rates and inflation (macroeconomic variables).
According to Bodie et al. (2008) investment theory explains that the business
environment is influenced by external factors which include macroeconomic factors and
internal environmental factors which include microeconomic factors. According to Tandelilin
(2017) the capital market reflects what happens in the macroeconomic environment, because
the value of an investment is determined by the expected cash flow and the required rate of
return on the investment, and both indicators are strongly influenced by changes in
macroeconomic factors. According to Fahmi (2014) Arbitrage Pricing Theory (APT) theory
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developed by Ross (1976) states that macroeconomic factors are general and directly affect
every asset price, but the intensity differs from one company to another. In other words,
macroeconomic variables including inflation, interest rates and exchange rates are thought to
affect capital market performance as measured by stock price movements.
According to Samuelson and Nordhaus (2010) when inflation increased in various
countries in 1990, stock prices on all world stock exchanges declined sharply. This
phenomenon shows that inflation is thought to have an influence on stock prices, including
the prices of company shares on the IDX30 index. Based on research by Qamri et al. (2015)
that inflation has a negative effect on stock prices, while according to Alamsjah (2017) states
that inflation has a positive effect on stock prices, but this is very contrary to the research of
Murdhaningsih et al. (2018) which states that inflation has no effect on stock prices.
According to Brigham and Houston (2013) that interest rates can affect competition in
the capital market between stocks and bonds, if interest rates rise, investors will sell their
shares and switch investments in bonds. According to Tandelilin (2017) bonds are highly
dependent on prevailing interest rates. This statement indicates that interest rates are thought
to have an influence on stock prices, including the company's share price on the IDX30
index. Based on the results of Rachmawati's research (2018), it is stated that interest rates
have a negative effect on stock prices, while according to Nurlina (2017), interest rates have a
positive effect on stock prices, but this is in contrast to Akpan and Chukwuduk's research
(2014) which states that interest rates have no effect on stock prices.
According to Arifin (2007) when the rupiah exchange rate against the US dollar
weakens, investors will switch to investing in dollars in banks. In addition, Bank Indonesia
increases interest rates to stabilize the value of the rupiah, because if left unchecked the value
of the rupiah will fall. This statement makes investors sell their shares, so that the share price
will decrease and is thought to have an influence on the company's share price, including the
share price on the IDX30 index. Based on the results of research by Wismantara and
Darmayanti (2017) which states that the exchange rate has a positive effect on the stock price
index, while according to Khan and Khan (2018) states that the exchange rate has a negative
effect on the stock price index, but this contradicts Ningsih and Muthmainnah (2019) which
states that the exchange rate has no effect on the stock price index.
In 2014-2018, 48 companies were listed on the IDX30 index, and more than 50% of the
companies have also left the IDX30 index. This is because the company does not meet the
financial performance required by the IDX, especially the company's liquidity ratio. In
addition, the profitability value is also below zero, which indicates that the company is
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making a loss (BEI 2019). Based on this, it is suspected that financial performance reflected
in the company's financial ratios is thought to affect the company's share price on the IDX30
index.
According to Alwi (2008), company performance as reflected in financial ratios is one
of the internal factors that affect stock prices. Analysis of the company's financial ratios is
useful for investors' decisions in long-term investment. The company's good financial ratios
indicate that the company's performance is also good, so the company is worth investing in
stocks. The ratios that are thought to affect the stock price of the IDX30 index include the
liquidity ratio, profitability ratio, leverage ratio and market ratio.
A good liquidity ratio is a ratio that describes the company's current assets exceed
current debt, so that the IDX can classify the company as a company with high liquidity.
Illiquid companies will be affected by financial distress and bankruptcy risk, so that it will
reduce the share price and the company can even be delisted from the Indonesia Stock
Exchange. This indicates that liquidity is thought to have an influence on the company's share
price on the IDX30 index. Based on the results of research by Gultom (2019) and Marsono et
al. (2018) states that the Current Ratio (CR) representative of the liquidity ratio has a positive
effect on stock prices, while according to Pratama et al. (2019) states that CR has no effect on
stock prices.
According to Tandelilin (2017) the profitability ratio is an important indicator that is
considered to determine the extent to which the investment that investors will make in a
company is able to provide a return that matches the level required by investors. According
to Budiman (2018) the higher the company's profitability value, the better the company's
stock value and the decision to invest. This indicates that profitability tends to have an
influence on the company's share price on the IDX30 index. Based on the results of research
by Marzuki and Akhyar (2019) and Ginsu et al. (2017) states that Return On Equity (ROE), a
representative of the profitability ratio, has a positive effect on stock prices, while according
to Hunjra et al. (2014) states that ROE has no effect on stock prices.
According to Budiman (2018) the leverage ratio describes the health level of the
company, as well as the strength of the company's capital structure. Debt and unhealthy
company conditions will create the risk of corporate bankruptcy, when the company is unable
to pay its debts. A good leverage ratio is below number one, because the lower the leverage
ratio, the better the company's shares, investment decisions and stock prices, so the leverage
ratio is thought to have an influence on stock prices. Based on the research results of
Gustmainar and Mariani (2018) and Nugraha and Sudaryanto (2016), it is stated that the Debt
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Equity Ratio (DER), a representative of the leverage ratio, has a negative effect on stock
prices, while according to Prazak and Stavarek (2017), DER has no effect on stock prices.
The market ratio is a ratio that is directly proportional to the stock price itself. When the
market ratio increases, it indicates that the share price is also increasing. This indicates that
market ratios affect stock prices. Based on research by Shittu et al. (2016) and Suselo et al.
(2015) which states that Price Book Value (PBV) as a representative of market ratios has a
positive effect on stock prices, while according to Putri (2018) states that PBV has no effect
on stock prices.
The empirical results above show different results from each independent variable on
the dependent variable. The difference can occur because the object of research, the place of
research and the length of time of research and the number of independent variables used are
different. Based on the different phenomena and empirical results above, it is the reason why
the authors conduct a reassessment with the title "Analysis of the Effect of Financial Ratios
and Macroeconomic Variables on Company Share Prices in the IDX30 Index". This study
aims to analyze, find out and prove how much influence financial ratios and macroeconomic
variables have on the company's share price in the IDX30 index.
Problem Formulation
The IDX30 index is one of the indices that the Indonesia Stock Exchange expects as a
benchmark in investing in stocks. The relatively small number of companies listed on the
IDX30 index makes it easier for investors to see the company's stock performance including
its stock price. According to Tandelilin (2017) macroeconomic variables as external factors
have a very strong effect on the company's stock price. The decline in the movement of the
company's share prices in the IDX30 index in 2018 is suspected of having an influence from
outside the company in the form of macroeconomic variables.
Samsul (2015) states that investors will react quickly when macroeconomic variables
change, because the capital market is a reflection of the macroeconomic environment and will
directly affect the movement of company stock prices. This will be a consideration for
investors to buy or sell shares immediately. The condition of macroeconomic variables that
are beyond the control of the company and the phenomenon of falling stock prices allegedly
caused by inflation, interest rates and the rupiah exchange rate against the US dollar, shows
the importance of forecasting these variables. The forecasting results are expected to be a
reference for investors to consider buying and selling stock prices, as well as a benchmark for
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companies in improving company performance to remain listed on the IDX30 index.
The company's financial performance through financial ratios is also thought to affect
the company's share price on the IDX30 index. This assumption can be shown by the number
of companies that have left the IDX30 index because the financial performance required by
the IDX is not fulfilled by the company, including its liquidity ratio. Based on the
background description above, the problem is formulated as follows:
1. How does the financial ratio affect the company's stock price in the IDX30 index for the
2014-2018 period?
2. How does the macroeconomic variable affect the company's stock price in the IDX30
index for the 2014-2018 period?
3. How to forecast the movement of macroeconomic variables in 2019 using trend analysis?
Capital Markets
According to Tandelilin (2017) the capital market is a meeting between parties who
have excess funds by trading securities. Thus the capital market can also be interpreted as a
market that trades securities that generally have a lifespan of more than one year, such as
stocks, bonds and mutual funds. The place where the buying and selling of securities takes
place is called the stock exchange. Capital Market Law Number 8 of 1995 defines the capital
market as "activities related to the public offering and trading of securities, public companies
related to the securities they issue, as well as institutions and professions related to securities".
According to Samsul (2015), the purpose and benefits of the capital market can be seen
from three points of view. The first point of view is the state's point of view that the capital
market was built with the intention of driving the economy of a country through private
power and reducing the burden on the state. The state has the power and power to regulate the
economy and does not have to own its own company.
The second perspective is the issuer's or company's perspective that the capital market
is a means to seek additional capital. The company is interested in obtaining funds at a lower
cost and it can only be obtained in the capital market. Increasing own capital is better than
increasing borrowed capital, especially to face competition in the era of globalization.
Companies that initially have higher debt than equity capital can turn around to have higher
equity capital than debt if they enter the capital market.
The third perspective is the public's view that the capital market is a new means to
invest their money. The capital market is a good way to invest small amounts of money for
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most people. If the capital market runs well, is honest, has stable growth and the price is not
too volatile, then it will bring prosperity to the community.
According to Samsul (2015) the definition of the capital market can be categorized into
4 types of markets. The first market (primary market) is the place or means for companies
that first offer shares or bonds to the general public. It is said to be the first time because the
company was previously owned by an individual or family, or by only a few parties, and is
now offering part of the ownership rights to the general public.
The second market (secondary market) is a place or transaction of buying and selling
securities between investors and prices are formed by investors through securities brokers. The
third market is a means of buying and selling securities between securities trading and
investors, where prices are formed by market makers. Investors can choose the market maker
that provides the best price. The fourth market is a means of buying and selling transactions
between selling investors and buying investors without passing through securities brokers.
Transactions are conducted directly face-to-face between buying investors and selling
investors for bearer shares.
Stock Investment
According to Tandelilin (2017) investment is a commitment to a number of funds or
other resources made at this time, with the aim of obtaining a number of benefits in the future.
According to Parahita (2011) investment is a logical activity when there is an increase in
inflation, because it can maintain the purchasing power of the money owned. According to
Arifin (2007), the higher the risk of an investment, the greater the promised profit. This is in
accordance with the financial axiom that states that high risk high return.
There are many forms of investment that can be done by everyone, one of which is
stocks. According to Prabawa (2011), the purpose of investing in stocks is to benefit from an
increase in stock prices or capital gains, as the value of the company increases. In addition,
profits from stocks are also distributed in the form of dividends periodically, in exchange for
the time and risk associated with the investment. This means that when the share price
increases, the shareholder will benefit, and vice versa when the share price decreases the
shareholder will bear the loss on the share investment.
Shares
According to Widioatmodjo (2012) shares are securities issued by a company in the
form of a Limited Liability Company (PT) or commonly called an issuer. Shares state that the
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owner of the shares is also a part owner of the company. Thus, when an investor buys shares,
he also becomes the owner or shareholder of the company. Consequently, shareholders bear
the losses and enjoy the profits of the shares.
According to Tandelilin (2017) shares are securities traded in the capital market in the
nature of equity, both ordinary shares and preferred shares as well as proof of rights and
warrants. Common stock is the most important and most recognized stock by the Indonesian
people. Preferred stock is a type of stock that has the right to receive profits first and has
cumulative profit rights. According to Aziz et al. (2015) stocks in terms of trading
performance include the following:
1. Blue Chip Stocks
Ordinary shares of a company that has a high reputation, is a leader in its industry, has
stable earnings and is consistent in paying dividends.
2. Income Stocks
Stocks that have the ability to pay higher dividends than the average dividend paid in the
previous year. Such issuers are usually able to generate higher earnings and are regular in
distributing cash dividends.
3. Growth Stocks
Stocks of issuers that have high revenue growth, as leaders in similar industries that have a
high reputation.
4. Speculative Stocks
Shares of a company that cannot consistently earn income from year to year, but has a
high probability of earning in the future, although it is not certain.
5. Counter Cyclical Stocks
Stocks that are not affected by macroeconomic conditions or the general business
situation. In times of economic recession, the price of these stocks remains high, as the issuer
is able to pay high dividends as a result of its ability to earn high income during the recession.
According to Aziz et al. (2015) the share price is a piece of paper that explains that the
owner of the paper is the owner of the shares regardless of the portion or amount of a
company that issues the paper (shares). Changes in stock prices will change the market value
so that the opportunities that investors will get in the future will also change. Stock prices
reflect various information that occurs in the capital market with the assumption that the
capital market is efficient. According to Widioatmodjo (2012) stock prices can be divided
into three prices as follows:
1. Nominal price
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The nominal price is the price listed on the share certificate set by the issuer to value each
share issued. The nominal price is important because dividends paid on shares are usually
determined based on the nominal value.
2. Prime price
The initial price is the price at which the shares are listed on the stock exchange in the
context of a public offering of initial share sales called an IPO (Initial Public Offering). The
share price in the primary market is usually determined by the underwriter and the issuer.
Thus it will be known at what price the issuer's shares will be sold to the public.
3. Market price
The market price is the selling price from one investor to another. This price occurs after
the shares are listed on the stock exchange and no longer involves the issuer and underwriter.
This price is referred to as the price in the secondary market and is the price that truly
represents the price of the issuing company, because in secondary market transactions, there
is very little price negotiation between investors and the issuing company. The price that is
announced every day in newspapers or other media is the market price recorded at the closing
time (closing price) of the Indonesia Stock Exchange activity.
A stock price index is a stock price expressed as an index number. For the purposes of
analysis related to stock returns, the use of stock indices is better than stock prices because it
can avoid bias due to corporate action. Corporate action is an issuer activity that can affect
the number of shares outstanding and the share price in the market (Darmadji and Fakhruddin
2012). These issuer activities include dividends, stock splits, and rights issues and corporate
actions carried out by companies can damage the analysis when using stock prices in rupiah
without being corrected first.
Types of stock indices are grouped into individual stock price indices, partial stock
price indices and the Composite Stock Price Index (CSPI) (Samsul 2015). The individual
stock price index is the stock index of each company. The formula for calculating the
individual stock price index is:
IDX30 Stock Index
The IDX30 Index is an index that measures the price performance of 30 stocks that
have high liquidity and large market capitalization and are supported by good company
fundamentals (IDX 2019). The IDX30 index was first launched on April 23, 2012 with a base
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value of 100. The IDX 30 index stocks are selected from the LQ45 index stocks (Tandelilin
2017). The criteria used to select the 30 stocks included in the IDX30 are as follows:
1. Ranked as the 60th largest share in total transactions on the regular market (average
transaction value over the last 12 months).
2. Ranking by market capitalization (average market capitalization value over the last 12
months.
3. Have been listed on the IDX for at least 3 months.
4. Financial condition and growth prospects of the company, frequency and number of days
of transactions in the regular market.
The methodology used by the IDX30 index in February 2019 is different from before.
The difference is that previously the index calculation was measured using the weighted
average method of market capitalization but in February 2019 it was replaced by the IDX with
the free float market capitalization method. The weighted average method is not all stocks are
traded, this is because some stocks are listed in scrip or owned by strategic investors who
have a motive to maintain their ownership in the long term. Therefore, to better illustrate the
real market conditions the IDX applies free float as an adjustment to market capitalization.
The definition of free float that will be applied in the calculation of the IDX30 index is
the total scripless shares owned by investors with less than 55% share ownership based on
data from PT Kustodian Sentral Efek Indonesia (KSEI). Meanwhile, the free float ratio of a
stock is the number of free float shares relative to the total of all such shares.
Macroeconomic Variables
According to Pracoyo and Pracoyo (2006) economics is a study of community behavior
in using scarce or limited resources in order to produce various commodities and then
distribute them to various individuals and groups in a society. Macroeconomics or
macroeconomics as a branch of economics, is the study of the economy as a whole or
aggregate. Macroeconomics explains economic changes that affect households, companies
and markets. According to Sari (2016) the objects analyzed in macroeconomics include
economic growth, national income, inflation, unemployment, government policy, poverty and
equity, balance of payments and foreign exchange rates.
Inflation
According to Hasyim (2017) inflation is an increase in product prices due to differences
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in the growth of nominal Gross Domestic Product (GDP) and real GDP, while the rate or
level of inflation is the percentage increase in product prices over a certain period. According
to Jawangga (2018) inflation describes a condition when the general price of goods
experiences a continuous increase or a decrease in the real value of domestic money (rupiah).
Inflation affects people's purchasing power, especially people with fixed incomes. The
inflation rate itself can be measured by comparing the current price level of a commodity
with the price level of that commodity in the previous period.
According to Jawangga (2018) inflation based on its severity is categorized as follows:
1. Mild inflation
Mild inflation is inflation of less than 10% per year. Although the prices of common goods
rise steadily, mild inflation has not yet led to an economic crisis.
2. Moderate inflation
Moderate inflation occurs at a rate of 10%-30% per year. This inflation has had a negative
impact on people on fixed incomes.
3. Severe inflation
Severe inflation occurs at a rate of 30%-100% per year. In this inflation, people usually
prefer to save money. People are also reluctant to save because the interest on savings is
lower than the inflation rate.
4. Uncontrolled inflation
Uncontrolled inflation has a severity above 100%. This economic event creates a level of
economic collapse.
Interest rate
According to Wijaya (2010) Bank Indonesia Certificates (SBI) is a monetary
instrument used by Bank Indonesia in controlling the money supply, namely by
accommodating surplus funds in banks and providing discount facilities when banks
experience a deficit. An increase or decrease in SBI interest rates can affect the increase and
decrease in deposit and credit interest rates in banks. According to Siamat (2005) the BI Rate
is a one-month interest rate announced by Bank Indonesia periodically for a certain period of
time which serves as a signal of monetary policy and operational targets. The BI Rate has
been used since 2005, where the BI Rate will affect Interbank Money Market (PUAB)
interest rates, deposit and credit interest rates, and longer-term interest rates.
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Exchange rate
According to Jawangga (2018) foreign exchange is a type of foreign currency that is
used as a means of payment in a country or abroad. If Indonesians buy shares from the United
States, Indonesians must pay with the United States currency, namely the United States
dollar. For Indonesians, the US dollar is foreign exchange. If the Indonesian people need
foreign exchange, they must exchange rupiah for the required foreign exchange at a bank or
foreign exchange place (money changer).
Forex or foreign currency rates show the price or value of another country's currency.
Forex rates are also defined as the amount of domestic money (e.g. rupiah) needed to obtain
foreign currency. If the exchange rate increases, it means that the domestic currency is
depreciating and the foreign currency is appreciating. And vice versa.
According to Sari (2016) there are two types of exchange rates, namely the selling rate
and the buying rate. The concept of selling and buying rates is viewed in terms of foreign
exchange traders. The first rate is the selling rate, which is the amount of rupiah that must be
spent when buying foreign currency. The second rate is the buying rate, which is the number
of rupiah received by someone when selling foreign currency.
Financial Ratio
According to Horne and Wachowicz (2005) financial ratios are indices that relate two
accounting numbers and are obtained by dividing one number by another. Financial ratios are
used to evaluate the financial condition and performance of the company. The results of these
financial ratios will show the health condition of the company concerned.
According to Cashmere (2010) financial ratios are activities that compare the numbers
in the financial statements by dividing another number. Comparisons can be made between
one component and a component in one financial statement or between components that exist
between financial statements. Then the numbers being compared can be numbers in one
period or several periods. In practice, the financial ratio analysis of a company can be
classified as follows:
1. Balance sheet ratios, which compare figures that are only sourced from the balance sheet.
2. Income statement ratios, which compare figures that are only sourced from the income
statement.
3. Ratio between reports, which compares numbers from two sources (mixed data) both on the
balance sheet and on the income statement.
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Liquidity Ratio
According to Fahmi (2014) states that the liquidity ratio is a ratio that describes the
company's ability to meet short-term debt obligations. This means that if the company is
billed, it will be able to fulfill the debt or pay the debt, especially the debt that is due. The
types of liquidity ratios include current ratio, quick ratio, cash ratio, cash turnover ratio, and
Inventory to net working capital.
Profitability Ratio
According to Arifin (2007), profitability ratio is a type of ratio that measures how much
the company's ability to make a profit. This is very important because buying shares means
that you are injecting fresh funds into the company. As a result, the company's capital
increases. If the capital increases but the ability to make a profit does not increase then there
must be something odd, so this must be considered by investors. The types of profitability
ratios include profit margin (profit margin on sales), return on investment, return on equity
and earnings per share.
Leverage Ratio
According to Cashmere (2010) the leverage ratio is a ratio used to measure the extent
to which the company's assets are financed with debt. That is, how much debt burden the
company bears compared to its assets. In a broad sense, it is said that the leverage ratio is
used to measure the company's ability to pay all its obligations, both short and long term, if
the company is dissolved. The types of leverage ratios include debt assets ratio, debt equity
ratio, long term debt equity ratio, times interest earned, fixed charge coverage.
Stock Market Price Ratio
According to Budiman (2018) share price analysis to determine whether the share price
of a company is too expensive or still attractive to invest in. Of course, even though a
company has very good health, if the share price is too high or too expensive. Then the stock
is not necessarily a good investment choice. Conversely, if there is a company that has
mediocre performance, but is sold at a very cheap price, it could be a more attractive
investment option. The stock market price ratios include price earning ratio and price book
value.
15
Previous Research
A number of previous studies used as references in this research are journals, theses and
theses. Although the scope is almost the same, different objects and time of research produce
different outputs. However, these studies can still be used as references to complement each
other.
Winarko (2018) there are three independent variables that affect the share price of food
and beverage companies listed on the IDX in 2012-2016, namely debt equity ratio, return on
equity and price earning ratio. The result is that the debt equity ratio has a positive effect on
stock prices, return on equity has a negative effect on stock prices and price earning ratio
has a positive effect on stock prices. Hutahean (2016) there are four independent variables
that affect the stock price of food and beverage companies in 2011-2016, namely return on
equity, earning per share, return on assets and net pofit margin. The results of his research
are return on equity and earning per share have a positive effect on stock prices, return on
assets and net profit margin have no effect on stock prices.
Pradika (2018) there are four independent variables that affect the Jakarta Islamic
Index (JII) in 2014-2017, namely inflation, BI Rate, rupiah exchange rate and world gold
prices. The results of his research are inflation and BI Rate each have a negative effect on the
JII, the exchange rate has a negative effect on the JII and the world gold price has a positive
effect on the JII. Syukriati (2015) there are three independent variables that affect the stock
price of agricultural subsector companies, namely the US dollar exchange rate against the
rupiah, Bank Indonesia interest rates and inflation. The results of his research are exchange
rates and interest rates each have a positive effect on stock prices, inflation has a negative
effect on stock prices.
Adwiyah (2014) there are eight independent variables that affect the share price of the
banking industry on the IDX, including the volume of share sales, the amount of money in
circulation, the deposit interest rate, the exchange rate of the rupiah against the US dollar,
return on investment, the inflation rate, the current ratio and the past share price. The results
of the 8 variables are the volume of stock sales, the interest rate on deposits, the exchange
rate of the rupiah against the US dollar and the current ratio have a positive effect on stock
prices. The amount of money in circulation, return on investment, inflation rate and past stock
prices have a negative effect on stock prices.
Istianawati (2014) there are two independent variables that affect stock returns in the
mining sector of pro-environmental and sharia stock groups including earning per share and
16
return on assets. The results of his research are that each earning per share and return on
assets has a positive effect on stock return prices. The previous research methods can be seen
in Table 1.
Framework of Thought
The capital market is a place to invest money for investors and increase capital for
companies. Shares are long-term financial instruments in the capital market which are able to
provide high stock returns behind high risk (high risk, high return). The share price is a very
important thing to consider in investing in shares in a company, because the movement of the
share price is a reflection of the company's performance. There are many types of stock
indices listed on the Indonesia Stock Exchange, including sectoral indices, KOMPAS100
index, Jakarta Islamic Index, LQ45 index, IDX30 index and others.
The many types of stock indices offered on the Indonesia Stock Exchange result in
novice investors being confused about buying shares. For this reason, investors are better off
choosing companies that have high liquidity and large market capitalization to invest in
stocks, because companies tend to avoid the risk of bankruptcy. For example, company
shares in the IDX30 index. In addition, the companies in the IDX30 are expected by the IDX
to be a benchmark in investing in stocks.
However, in 2018 the IDX30 index experienced a decline, this decline almost occurred
in every type of stock index on the Indonesia Stock Exchange. Throughout 2014-2018 there
were 48 companies listed on the IDX30 index, less than 50% of the companies that remained
consistently on the IDX30 index list. This is also the basis of research why stocks with high
capitalization and high liquidity and have been selected by the Indonesia Stock Exchange
cannot be consistent and must leave the 30 high-capitalization stock list. This is thought to be
from factors within the company (internal) in the form of poor financial ratios coupled with
factors from outside the company (external) in the form of volatile macroeconomic variables.
The financial ratios that are thought to affect stock prices on the IDX30 include Current
Ratio (CR), Return On Equity (ROE), Earning Per Share (EPS), Debt Equity Ratio (DER)
and Price Book Value (PBV). Macroeconomic variables that are thought to affect stock prices
on the IDX30 index include inflation, interest rates and exchange rates. However, there are
still many financial ratios and macroeconomic variables that affect stock prices, but the
researcher's suspicion is stronger on the above variables. Based on the background and
problem formulation, the researcher will examine the effect of financial ratios and
17
macroeconomic variables on the company's stock price on the IDX30 index for the 2014-
2018 period using the panel data multiple linear regression analysis method.
In addition, researchers also conduct forecasting of macroeconomic variables that affect
the company's share price on the IDX30 index using trend analysis. Macroeconomic
variables are predicted, because they are beyond the control of the company. Thus investors
can consider buying and selling shares and companies can improve company performance so
that they remain listed on the IDX30 index expected and carried out by the company from
this research is to formulate and improve strategies so as not to harm investors, and investors
remain consistent in investing in the company. Based on the description of the framework
above, the following can be seen the researcher's framework scheme as shown in Figure 2.
Research Variables
The variables used in the study include the stock price of each company in the IDX30
index for the 2014-2018 period as the dependent variable (Y) and variables derived from
financial and macroeconomic ratios as independent variables (X). The financial and
macroeconomic ratio variables in this study include current ratio (X1), return on equity (X2),
earnings per share (X3), debt equity ratio (X4), price book value (X5), inflation (X6),
interest rates (X7) and exchange rates (X8).
Current Debt to Current Assets Ratio (Current Ratio)
Current Ratio (CR) is one of the liquidity ratios that measures the ratio of current assets
to current debt of the company in units of rupiah (Rp). The CR measurement scale in this
study is a ratio in percentage units (%). The following is the CR calculation formula (Kasmir
2010).
Ratio of Net Income to Total Capital (Return On Equity)
Return On Equity (ROE) is one of the profitability ratios that measures the ratio of net
profit per year to the total equity owned by the company in rupiah (Rp). The ROE
measurement scale in this study is a ratio with percentage units (%). The following is the
ROE calculation formula (Budiman 2018).
Sampling Method
The sample withdrawal method in this study uses purposive sampling technique with
the aim of obtaining samples that are in accordance with the research objectives. The
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purposive sampling technique is a sampling method based on certain considerations or
criteria. The criteria for companies that are sampled in this study are companies listed on the
IDX30 index on the Indonesia Stock Exchange from February 2014 to January 2019
(adjusting to the time when the list of companies listed on the IDX30 index is released,
namely February and August). Based on the above criteria, there are 48 companies that have
been listed on the IDX30 for the 2014-2018 period.
The number of 48 companies multiplied by five years obtained 240 observations. The
existence of 2 companies that have just conducted an IPO and are listed on the IDX, namely
PP Properti Tbk. (PPRO) in 2015 and Waskita Beton Precast Tbk. (WSBP) in 2016 reduces
observations to 237.
Research Hypothesis
The following is a hypothesis of the influence of each independent variable which
includes CR, ROE, EPS, DER, PBV, inflation, interest rates, and exchange rates on the
dependent variable company stock prices on the IDX30 index.
Effect of Current Ratio (CR) on Stock Price
Current Ratio (CR) or current ratio is a ratio that measures the company's ability to pay
short-term liabilities or debts that are due immediately when billed as a whole, in other words
how much current assets are available to cover short-term liabilities that are due immediately.
CR can be said to be a form of measuring the level of security (margin of safety) of a
company (Kasmir 2010). This means that the higher the current ratio, the better for the
company, thereby improving the company's performance through its operations and resulting
in the movement of the company's share price also increasing. Reinforcing this theory, the
results of research by Gultom (2019) and Marsono et al. (2018) states that Current Ratio
(CR) has a positive effect on stock prices, so based on concepts, theories and empirical
results, the following hypothesis (Ha1) can be proposed:
Effect of Return On Equity (ROE) on Stock Price
Return On Equity (ROE) is the company's ability to utilize shareholder funds to
generate the maximum possible profit (Budiman 2018). According to Kasmir (2010) ROE
shows the efficient use of own capital, this indicates that the higher the ROE ratio, the better
for the company, because the return required by investors on capital has been managed by the
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company well. With the increase in company returns, it will increase investor enthusiasm for
investing in shares, so that it will affect stock price movements. Reinforcing this theory, the
results of research by Marzuki and Akhyar (2019) and Ginsu et al. (2017) states that Return
On Equity (ROE) has a positive effect on stock prices, so that the theory, concepts, and
empirical results above can be proposed hypothesis.
Effect of Earning Per Share (EPS) on Stock Price
Earning Per Share (EPS) is also known as the book value ratio, which is a ratio to
measure the success of the company's management in achieving profits for shareholders. A
low ratio means that the company's management has not succeeded in satisfying
shareholders. Conversely, with a high ratio, the welfare of shareholders increases (Kasmir
2010). When investors know the profit for each share increases, investors will continue to
maintain their shares, because the company is considered to have good performance. In
addition, investors will also increase the frequency of share purchases, because investors have
imagined that if one share earns a high profit, what if millions of shares are owned, of course
it will be even higher. Fluctuating frequency of stock purchases will also affect the movement
of stock prices in the capital market. To strengthen this theory, the results of research by
Ahmed (2018), Veronica (2018), and Kumar (2015) show that the EPS ratio has a positive
and significant effect on stock prices. Based on the concepts, theories and empirical results
above, the following hypothesis (Ha3) can be proposed:
Effect of Debt Equity Ratio (DER) on Stock Price
Debt Equity Ratio (DER) is a debt ratio described by the ratio between all debt, both
short-term debt and long-term debt with equity capital (Horne and Wachowicz 2005) and
(Bambang 2002). The greater the debt, the greater the risk borne by the company. A smaller
cost of debt than equity funds by adding debt to its balance sheet will generally increase the
profitability of the company, which will then increase the share price, thereby increasing
shareholder welfare and building greater stock potential. Conversely, the cost of debt that is
greater than equity funds by adding debt to the balance sheet will in its balance sheet actually
reduces profitability (Walsh et al. 2004). This means that the DER ratio is thought to have an
influence on stock prices, because a high DER ratio will reduce stock prices and vice versa.
Reinforcing this theory, the results of research by Gustmainar and Mariani (2018) and
Nugraha and Sudaryanto (2016) show that the DER ratio has a negative effect on stock
20
prices.
Effect of Price Book Value (PBV) on Stock Price
Price to Book Value (PBV) is a market ratio used to measure the performance of the
stock market price against its book value. PBV is the relationship between the stock market
price and the book value per share (Jones 2007). The greater the PBV value, the higher the
market price of the stock. If the market price of a stock is higher, the required stock return is
also higher (Rosenberg et al. 1985). Companies with good performance usually have a PBV
ratio value above one, indicating that the stock market value is higher than the book value
(Aziz et.al 2015). Reinforcing this theory, the results of research by Shittu et al. (2016) and
Suselo et al. (2015) show that the PBV ratio has a positive effect on stock prices. Based on
the concept, theory and empirical results above, the following hypothesis (Ha5) can be
proposed:
Effect of Inflation on Stock Price
Inflation is the tendency for the overall price of products to increase. This means that
the economy is experiencing a demand for products that exceeds its product supply capacity,
so prices tend to rise. In addition, high inflation can reduce the level of real income earned by
investors from their investments. Conversely, if a country's inflation rate decreases, then this
will be a positive signal for investors along with a decrease in the risk of the purchasing
power of money and the risk of real income. A relative increase in inflation is a negative
signal for investors in the capital market. If the increase in production costs is higher than the
increase in prices that the company can enjoy, the company's profitability will fall (Tandelilin
2017). According to Samsul (2015), high inflation will bring down the economy so that many
companies experience bankruptcy and finally stock prices will fall in the market. Reinforcing
this theory, the results of research by Qamri et al. (2015) shows that inflation has a negative
effect on stock prices.
Effect of Interest Rate on Stock Price
High interest rates will certainly have an impact on the allocation of investment funds
for investors. Investing in bank products such as deposits or savings is clearly less risky than
investing in stocks. This is because investors will sell their shares and the funds are then
placed in the bank. This simultaneous sale of shares will result in a significant decline in
21
share prices. In addition, the impact of high bank interest rates is that banks will also increase
lending rates, because banks also do not want to lose. This is because banks incur high
interest costs when investors invest in savings and deposits. High interest rates on loans from
banks will also increase the debt of the company, because almost all large companies listed
on the stock exchange list their shares in the form of borrowed funds (Arifin 2007). The
increasing debt of the company will increase interest costs and impact on the company's
profitability and dividend distribution. If this happens, the fundamental condition of the
company will be unfavorable. The impact will be that many investors will release their shares
and there will be a decline in stock prices. According to Brigham and Houston (2013) interest
rates affect the company's share price by affecting the company's profit, this happens because
interest rates are a cost. Reinforcing this theory, the results of Rachmawati's research (2018)
show that interest rates have a negative effect on stock prices. Based on the concepts, theories
and empirical results above, the following hypothesis (Ha7) can be proposed:
Effect of Exchange Rate on Stock Price
Strengthening the rupiah exchange rate against the US dollar will reduce the cost of
importing raw materials for production and Bank Indonesia will reduce interest rates
(Tandelilin 2017). This is because the company buys raw materials in the form of foreign
currencies which will reduce the company's cost burden, so that it will increase company
profits. Increased profits indicate good company performance. In addition, the weakening of
the rupiah exchange rate against the US dollar will harm companies that owe in dollars and
sell products abroad (Samsul 2015). This is because countries that import buy products at low
prices, so that it will reduce company profits and will have an impact on the company's
financial decline including the share price owned by the company. Reinforcing this theory,
the results of research by Wismantara and Darmayanti (2017) show that exchange rates have
a positive effect on stock prices. Based on the concept, theory and empirical results above,
the following hypothesis (Ha8) can be proposed:
Common Effect Model
According to Widarjono (2013) this model is the simplest model for estimating panel
data model parameters, namely by combining cross section and time series data as one unit
without seeing any differences in time and individuals. The approach used in this model is the
Ordinary Least Square (OLS) method.
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Fixed Effect Model
According to Widarjono (2013), this model estimates panel data using dummy variables
to capture intercept differences. This approach is based on the existence of intercept
differences between individuals, but the intercept is the same between times. The approach
used in this model uses the Least Square Dummy Variable (LSDV) method.
Random Effect Model
According to Widarjono (2013) this model estimates panel data where disturbance
variables may be interconnected over time and between individuals. Differences between
individuals and between times are accommodated through errors. Because of the correlation
between disturbance variables, the OLS method cannot be used, so the random effect model
uses the Generalized Least Square (GLS) method. The statistical tests in determining the
panel data regression model are as follows:
Classical Assumption Test
According to Widarjono (2013) the classical assumption test (Gauss Markov) is a test
carried out on regression estimates with the ordinary least square (OLS) method. If this
assumption is met, then the parameters obtained by OLS are Best Linear Unbiased Estimator
(BLUE).
Normality Test
According to Widarjono (2013) the normality test is a test that creates a normal
probability plot and performs hypothesis testing to check whether observations follow a
normal distribution. If the data is not normally distributed, regression functions that require
data normality will produce inaccurate or biased conclusions. To detect whether the residuals
are normally distributed or not, namely by looking at the Jarque Bera (JB) value, so that the
following hypothesis can be formulated:
Heteroscedasticity Test
According to Widarjono (2013) the heteroscedasticity test is a constant residual
variance. The residual variance does not change with the change of one or more independent
variables. If this assumption is met, the residuals are called homokedasitas. The
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heteroscedasticity test in the study was carried out by the white method, so the hypothesis can
be formulated as follows:
Multicollinearity Test
According to Widarjono (2013) the multicollinearity test aims to test whether there is a
correlation between independent variables in the regression model. A good regression model
is one in which there is no correlation between the independent variables. To test whether
there is multicollinearity, it is done by regressing the analysis model and testing the
correlation between independent variables using the Variance Inflation Factor (VIF). For the
multicollinearity test in this study, VIF was used, so the hypothesis can be formulated as
follows:
Autocorrelation Test
According to Widarjono (2013) a correlation equation that is good and feasible to
predict is if it does not have an autocorrelation problem, that is, there is no correlation
between the data at time t and the previous time (t-1). Autocorrelation testing in this study
uses the durbin-watson method, with the following steps:
1. Look at the durbin-watson (dw) value in the regression model table.
2. The durbin-watson table looks at the dL (durbin lower) and du (durbin upper) values, by
adjusting the number of samples (k) and independent variables (t).
3. Durbin-Watson method decision making is done if
Statistical Test T (Partial) and F (Simultaneous)
According to Ghozali (2016) the t test or test of significance is used to determine how
much influence the independent variable has on the dependent variable. The t test conducted
in this study is to measure the significance level of the influence of each independent variable
on the company's stock price on the IDX30 index for the 2014-2018 period. Independent
variables in this study include CR (X1), ROE (X2), EPS (X3), DER (X4), PBV (X5), inflation
(X6), interest rates (X7) and exchange rates (X8). The significance level used in this study is
0.05 (α = 5%).
According to Ghozali (2016) the f test is used to test the linear relationship of all
independent variables together (simultaneously) on the dependent variable. The f test is used
24
to determine the significance of the regression equation model, whether there is a significant
relationship between variable X and variable Y. In this study, a simultaneous test of financial
and macroeconomic ratio variables on the company's stock price on the IDX30 index for the
2014-2018 period was carried out.
Coefficient of Determination (Adjusted R-Squared)
According to Ghozali (2016), the coefficient of determination essentially measures
how much the model's ability to explain variations in the dependent variable. The coefficient
of determination R2 is between zero and one. A small R2 value or below 0.5 means that the
ability of the independent variables to explain the dependent variable is very limited.
Conversely, a value close to one means that the independent variables provide almost all the
information needed to predict the variation in the dependent variable.
According to Widarjono (2013), one of the big problems of using the coefficient of
determination R2 is that its value always increases when adding independent variables in the
model even though independent variables do not necessarily have justification or justification
from economic theory or economic logic. Econometricians have developed other alternatives
so that the value of R2 does not formulate a function of the independent variable. 2As an
alternative, the Adjusted R-Squared is used.
Trend Analysis
According to Supranto (2016) trend analysis is a trend line that is very useful in making
a forecasting for planning purposes. Trend analysis is a method that matches a general trend
model to time series data, so that later linear, quadratic, exponential, and s-curve models can
be selected. Trend modeling is selected based on the accuracy of the data, the smaller the
Mean Absolute Percentage Error (MAPE), Mean Absolute Deviation (MAD), and Mean
Squared Deviation (MSD) values of the data, the more suitable the model built against the
data (Saludin 2017). As for forecasting, researchers use Minitab 16 software.
Development of Companies in the IDX30 Index
The IDX30 index is the top 30 stocks on the IDX released based on market
capitalization, liquidity, transaction value, transaction frequency and financial statements of
listed companies. These criteria are very helpful for investors to choose the right company
stocks, but not all companies in the IDX30 index have good company performance, because
there is an influence of factors outside the company (internal) and factors outside the
25
company's control (external). The performance of companies listed on the IDX30 may only
be good once selected by the IDX, but after entering it, the company may experience
financial distress and eventually drop out of the IDX30 index list. Companies that are
consistent in the IDX30 index include banking companies, for five consecutive years
included in the IDX30 list, namely Bank Central Asia, Bank Negara Indonesia, Bank Rakyat
Indonesia and Bank Mandiri.
Throughout 2014-2018 the companies listed on IDX30 were 48 companies and there
were two new companies with IPO status on the Indonesia Stock Exchange that made initial
public offerings in 2015 and 2016, namely PP Properti Tbk. (PPRO) in 2015 and Waskita
Beton Precast Tbk. (WSBP) in 2016. The number of IDX30 companies that left the IDX30
index list for the 2014-2018 period can be shown in Figure 3.
The bar graph in Figure 3 shows the number of companies that left the IDX30 index
list, the most in 2014 and 2018, namely seven companies, the least in 2016 as many as three
companies. In 2014, the companies that left were Bhakti Investama Tbk (BHIT), Bumi
Resources Tbk (BUMI), XL Asiata Tbk (EXCL), Bukit Asam Coal Mine (PTBA), AKR
Corporindo Tbk (AKRA), Indo Tambangraya Megah Tbk (ITMG) and Pakuwon Jati Tbk
(PWON). The companies that exited in 2016 were Vale Indonesia Tbk (INCO), PP London
Sumatra Indonesia Tbk (LSIP), Matahari Putra Prima Tbk (MPPA) and Wijaya Karya Tbk
(WIKA). In 2018 the companies that exited were Adhi Karya Tbk (ADHI), Media Nusantara
Citra Tbk (MNCN), PP Properti Tbk (PPRO), Global Mediacom Tbk (BMTR), Lippo
Karawaci Tbk (LPKR), Pakuwon Jati Tbk (PWON) and Sawit Sumbermas Sarana Tbk
(SSMS).
These companies left the IDX30 index list and then some returned to enter, such as
Pakuwon Jati Tbk (PWON), PWON left in August 2014 and re-entered in August 2015. The
exit of these companies from the IDX30 index is because they do not meet the IDX criteria,
such as unhealthy company financial reports. For example, Matahari Putra Prima Tbk
(MPPA) exited in August 2016.
Descriptive Statistics Analysis
Descriptive statistical analysis aims to describe the data from this research variable,
namely the company's stock price on the IDX30 index, CR, ROE, EPS, DER, PBV, inflation,
interest rates, and the rupiah exchange rate against the United States dollar for the 2014-2018
26
period. The results of descriptive statistical analysis of the variables of this study can be
shown in Table 2.
Based on Table 2, it shows that in the 2014-2018 period the average value of all prices
per share of companies listed on the IDX30 index was IDR 7 299.21. The highest price is
IDR83 800 owned by PT Gudang Garam Tbk. (GGRM) in 2017. The lowest price is IDR 44
owned by PT PP Properti Tbk. (PPRO) in 2015. The low price of PPRO shares is because on
May 19, 2015 it just conducted an IPO on the Indonesia Stock Exchange and was
successfully included in the IDX30 index list (Appendix 1).
The average CR ratio in the 2014-2018 period of all companies listed on the IDX30
index was 207%. This is very good for the company because the current debt owned by the
company is 100% of its current assets. The highest CR ratio is 971.69% owned by PT Media
Nusantara Citra Tbk (MNCN) in 2014. While the lowest CR ratio of 9.59% was owned by PT
Bank Mandiri Tbk. (BMRI) in 2018 (Appendix 1).
The average ROE ratio in the 2014-2018 period of all companies listed on the IDX30
index was 20.89%. While the highest ROE ratio is 799.10% owned by PT Matahari
Department Store Tbk. (LPPF) in 2014. This indicates that the rate of return from LPPF
shares is very fast. The lowest ROE ratio is -105.90% owned by PT Matahari Putra Prima
Tbk. (MPPA) in 2017, meaning that MPPA did not earn a positive profit in that year
(Appendix 1).
The EPS ratio for the 2014-2018 period is averaged with a value of Rp 446.9. While the
highest EPS ratio is Rp. 4 050.27 owned by PT Gudang Garam Tbk. (GGRM) in 2018,
meaning that the net profit earned by the company for each share is Rp. 4 050.27. While the
lowest EPS ratio of Rp (752.92) is owned by PT Medco Energi Tbk (MEDC) in 2015. This
occurred because there was still an influence from the increase in fuel prices in 2014
(Appendix 1).
In addition, the average DER ratio for the 2014-2018 period of 189.59% indicates that
the average total debt owned by each company in the IDX30 index is more than its total
equity. The low DER value will have an impact on the company's financial performance. In
2014, the highest DER ratio of 1 819% was owned by PT Matahari Department Store Tbk.
(LPPF), while the lowest DER ratio occurred in 2018 owned by PT Vale Indonesia Tbk.
(INCO) which amounted to 5.00% (Appendix 1).
Another thing is that the PBV ratio for the 2014-2018 period in each company listed on
the IDX30 index has an average value of 7.37 times. This means that the average share price
in the market exceeds its book value. In 2014 the highest PBV ratio of 370.78 times was
27
owned by PT Gas Negara Tbk (PGAS). While in 2014 the lowest PBV ratio value is owned
by PT Matahari Department Store Tbk (LPPF) of -241.68 times, the negative PBV ratio is
unusual for prices, because this data is sourced from the Indonesia Stock Exchange,
researchers still use it in analyzing it (Appendix 1).
Inflation is the result of too much money in circulation, which causes the prices of
products to increase, including stock prices in the stock market. The worst inflation occurred
during the Asian financial crisis in 1998, where inflation rose approximately 100% from the
beginning. For the 2014-2018 period, every year inflation is not less than 10%. This indicates
that inflation has a positive impact on the economy.
Based on Table 2, the highest inflation rate occurred in 2014 at 8.36%, while the lowest
inflation occurred in 2016 at 3.02% for the 2014-2018 period (Appendix 2). The average
inflation rate for the 2014-2018 period was 4.26%. The high inflation in 2014 was caused by
the increase in the price of fuel oil (BBM). The relatively high inflation rate was influenced
by commodities whose prices fluctuated throughout 2014, including gasoline contributing a
share of 1.04%, besides that electricity tariffs contributed a share of inflation in 2014 of
0.64% and many more causes of high inflation in 2014.
In addition to inflation, a factor that will affect economic growth is the interest rate set
by Bank Indonesia. Increasing interest rates will be favorable for commercial banks as more
investors invest in banks than in the capital market. The interest rate issued by Bank Indonesia
changed from the BI Rate to the BI-7 Day Repo Rate. This interest rate was issued by BI on
August 19, 2016. The purpose of changing the benchmark interest rate is to strengthen the
monetary operating framework in order to strengthen the effectiveness of policies that affect
the money market, banking and real sector.
In 2014, interest rates reached a high of 7.75% in 2014, and a low of 4.25 in 2017 for
the 2014-2018 period. While the average interest rate for the 2014-2018 period is 6.02%
(Appendix 3 and 4). Interest rates are closely related to the rupiah exchange rate against the
US dollar. When the rupiah weakens against the US dollar, BI always raise interest rates
because BI does not want the rupiah to fall and demand for the rupiah to decline.
Based on Table 2, the average exchange rate of the rupiah against the US dollar was
Rp13 548.21, while the highest exchange rate occurred in 2018 at Rp14 481 and the lowest
occurred in 2016 at Rp13 436 for the period 2014-2018 (Appendix 5). According to Bank
Indonesia in 2018, the weakening of the rupiah exchange rate was due to the continued
increase in the benchmark interest rate by the US Federal Reserve. On the other hand, factors
that affect the strength of the rupiah, namely the large current account deficit compared to
28
capital and financial transactions to cover it and the US trade war with China so that the yuan
exchange rate weakened and affected Indonesia.
Heteroscedasticity Test Results
To find out whether this research data is free from heteroscedasticity, the results of the
heteroscedasticity test can be shown in Table 5 shows the results of the heteroscedasticity test
using the WLS (Weighted Least Square) method. In addition, according to Widarjono (2013)
WLS is a method of healing data that experience heteroscedasticity. The results of the
heteroscedasticity test can be seen by comparing the R-squared and sum squared resid of
weighted unweighted statistics with weighted statistics.
In weighted unweighted statistics the R-squared value is 2.16E+09 with a sum squared
resid value of 2.83E+09. In weighted statistics the R-squared value is 0.9284 with a sum
squared resid value of
2.16E+09. Based on the weighting of unweighted statistics with weighted statistics, the R-
squared value increases from 0.9268 to 0.9284, while the sum squared resid value decreases
from 2.83E+09 to 2.16E+09. The decreased sum squared resid means that the residual value
of the effect of the dependent variable on the independent variable has been used, resulting in
an increased R-squared value, in other words, the data is free from heteroscedasticity.
Multicollinearity Test Results
The multicollinearity test used in this study is the Variance Inflation Factor (VIF).
The multicollinearity test results can be shown in Table 6.
Table 6 shows the results of the multicollinearity test on the 8 independent variables,
where the results show that the value of each independent variable on the centered VIF does
not exceed 10. Thus the research data is free from multicollinearity.
Autocorrelation Test Results
Autocorrelation tests are only performed on time series data (Gujarati 2012). Time
series data is stronger to be affected by autocorrelation because autocorrelation looks at the
correlation of one period's residuals with the previous period's residuals. The length of the
period in the study is 2014-2018 for each company. This means that after 2018 it returns to
2014 for different company data, so it is impossible to do an autocorrelation test, if
autocorrelation itself is used to see the effect of time t on time (t-1). In order to still fulfill the
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classic assumption test, the autocorrelation test is still carried out, where the results of the
autocorrelation test with the durbin-watson method can be shown in Table 7.
Table 7 shows the durbin-watson (dw) value of 1.80 with the number of independent
variables (k) of 8 variables and observations (t) of 237 samples. There are no dL and dw
values in the durbin-watson table for 237 observations, so interpolation is used to obtain dL
and dw values, because the number of observations is between 230 and 240. Based on the
interpolation calculation, the durbin lower (dL) value is 1.72 and the durbin upper (du) value
is 1.84. The dw value is between dL and (4-du) (1.72 < 1.80 < 2.16), thus the data is free
from autocorrelation.
Effect of CR on Stock Price
Table 8 shows the CR coefficient value of 2.99 which interprets that every 1% increase
in the CR ratio will increase the company's stock price on the IDX30 index by Rp2.99
assuming the value of the other independent variables is zero. In addition, the CR coefficient
also gives a positive direction to the stock price. The probability value of CR of 0.02
interprets CR to affect stock prices at a significance level of 5% (0.02 <0.05). This is in
accordance with the research of Gultom et al. (2019) and Marsono et al. (2018) which states
that CR has a positive effect on stock prices. The positive effect of CR as one of the liquidity
ratios on stock prices indicates that current assets and current liabilities are things that
investors consider to invest in stocks. This means that the high and low CR ratio will affect
the increase and decrease in stock prices. In addition, investors realize that the liquidity of the
company will provide a small risk of bankruptcy, so the Indonesia Stock Exchange has
grouped the stocks of companies with high liquidity to make it easier for investors to invest in
stocks. This also indicates that the shares of companies in the IDX30 index with high
liquidity values will affect the increase and decrease in the company's share price. Another
thing is that the company also considers CR to give a reaction to potential investors and
shareholders in particular that the company's condition is always in a safe and stable
condition, which automatically tends to stabilize the company's share price and is even
expected to continue to increase. It is the character of investors to always favor stocks that
tend to be safe and continue to increase. Companies that have a high liquidity ratio (CR) will
be in demand by investors and have an impact on stock prices which tend to increase due to
high demand. Strengthening the company's CR ratio will be good news which is then studied
using the signaling theory approach that investors will make decisions to invest in stocks
which will have an influence on the increase in stock prices. According to Jumingan (2010)
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CR of 200% is sometimes considered a satisfactory current ratio for industrial companies or
commercial companies, while for service-producing companies such as electricity companies
and hotels the figure of 100% is said to be sufficient. Indeed, for the management of the
company having a high CR is considered good, even for creditors it is seen that the company
is in a strong condition. However, for shareholders this is not considered good, in the sense
that company management does not utilize CR properly and effectively or in other words the
level of creativity of company management is low. This is in accordance with Fahmi (2014)
which states that too much CR is too high. A high CR is considered bad because each value of
each item of current assets and current liabilities indicates problems such as cash hoarding,
large amounts of uncollectible receivables, inventory buildup, inefficient utilization of free
"financing" from suppliers and low short-term borrowings.
Effect of ROE on Stock Price
Table 8 shows the ROE coefficient value of 29.82 which interprets that every 1%
increase in the ROE ratio will increase the company's stock price on the IDX30 index by
Rp29.82 by assuming the value of the other independent variables is zero. In addition, the
ROE coefficient also gives a positive direction to the stock price. The probability value of
ROE of 0.00 interprets ROE to affect stock prices at the 5% significance level (0.00 <0.05).
This is in accordance with the research of Marzuki and Akhyar (2019) and Ginsu et al.
(2017) shows ROE has a positive effect on stock prices. The positive effect of ROE as one of
the profitability ratios on stock prices indicates that the return expected by investors on
invested capital is highly considered by investors. Return as measured by capital gain for
speculators is an interesting thing, because investors can buy shares when the price goes
down and sell them back when the price goes up, and the difference seen in abnormal return
is what will be calculated profit. Investors really expect a large and fast rate of return on the
capital invested in the company. This for investors is a very valuable benchmark in making
decisions in investing in shares. The increase in ROE indicates that the company has been
able to manage funds sourced from investors by generating a fast and high rate of return. This
will encourage investors' interest in investing in shares to be higher, so that investors are
more generous to invest their funds in the company. The high rate of return will also increase
demand for shares, because investors are more interested and believe in the profits generated
by the company. This will lead to an increase in the share price. The company's failure to
manage funds on the rate of return will result in the company being delisted from the IDX30
index list. For example, the company Aneka Tambang Tbk (ANTM) in 2015 was delisted
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from the IDX30 index list, because the company has not been able to manage its capital
properly, resulting in losses. ANTM in 2014 had a capital of 11 930 billion rupiah, then
increased to 18 317 billion rupiah in 2015. In addition, the losses experienced by ANTM
increased from -775 billion rupiah to -1 441 billion rupiah (BEI 2019).
Effect of EPS on Stock Price
Table 8 shows the EPS coefficient value of 2.82 which interprets that each increase in
the EPS ratio of Rp1 will increase the company's stock price on the IDX30 index by Rp2.82
by assuming the value of the other independent variables is zero. In addition, the EPS
coefficient also gives a positive direction to the stock price. The probability value of EPS of
0.00 interprets that EPS has an effect on stock price shares at the 5% significance level (0.00
<0.05). This is in accordance with the results of research by Ahmed (2018), Veronica (2018)
and Kumar (2015) which state that EPS has a positive effect on stock prices. The positive
effect of EPS on stock prices indicates that earnings for each share are highly considered and
considered by investors in investing in stocks. This means that the size of the net profit
earned by the company will affect the increase and decrease in stock prices. The amount of
profit earned for each share will increase the enthusiasm for investing in shares by investors,
because investors tend to want high profits. This encourages the demand for shares to
increase, so that it will affect the frequency of stock sales and stock price movements in the
market. In addition, EPS is highly dependent on the number of shares outstanding in the
market, the number of shares outstanding indicates whether or not investors are active in
trading shares in the capital market. The greater the number of shares outstanding indicates
that investors believe in the company, because it generates large profits. This trust encourages
investors to keep investing and even increase the demand for shares. This will also affect the
movement of stock prices in the market.
Effect of DER on Stock Price
Table 8 shows the DER coefficient value of -6.14 which interprets that every 1%
increase in the DER ratio will reduce the company's stock price in the IDX30 index by
Rp26.14 assuming the value of the other independent variables is zero. In addition, the DER
coefficient also gives a negative direction to the stock price. The probability value of DER of
0.00 interprets that DER has an effect on stock prices at the 5% significance level (0.00
<0.05). This is in accordance with the research of Gustmainar and Mariani (2018), Nugraha
and Sudaryanto (2016) which states that DER has a negative effect on the stock price index.
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The negative effect of DER on stock prices indicates that DER as one of the leverage ratios is
important to investors in investing in stocks. This means that the size of the DER ratio will
affect the increase and decrease in stock prices on the IDX30 index. In addition, the size of
the private funds used by the company will also affect the enthusiasm of investors in
investing in shares. Investors prefer companies that have larger private funds than borrowed
funds. Debt from companies is highly dependent on the cost of borrowed funds. The cost of
this debt comes from the high and low interest rates set by Bank Indonesia. Based on the
DER ratio data on IDX30 companies for the 2014-2018 period, in general, the ratio has
decreased. This means that the company's debt and costs are very low, and the company has
managed its capital well to pay off its obligations. This is also supported by a decrease in
interest rates. The use of debt that is too high will endanger the company because the
company will fall into the category of extreme leverage (extreme debt), namely the company
is trapped in a high level of debt and it is difficult to release the debt burden. Therefore, the
company should balance how much debt is worth taking and from which sources to pay the
debt (Fahmi 2014).
Effect of PBV on Stock Price
Table 8 shows the PBV coefficient value of 29.46 which interprets that each increase in
the PBV ratio by 1 time will increase the company's share price on the IDX30 index by
Rp29.46 by assuming the value of the other independent variables is zero. In addition, the
PBV coefficient also gives a positive direction to the stock price. The probability value of
PBV of 0.00 interprets PBV to affect stock prices at the 5% significance level (0.00 <0.05).
This is in accordance with the research of Shittu et al. (2016) and Suselo et al. (2015) which
states that PBV has a positive effect on stock prices. The positive effect of the PBV ratio on
stock prices indicates that investors consider PBV in investing in stocks. This means that the
size of the PBV ratio will affect the increase and decrease in stock prices. Company value is
commonly indicated by PBV. The prospect of the company depends on the size of the PBV.
The PBV ratio is related to the book value recorded by the company. When the market price
exceeds the book value, it means that the growth rate of the company shows future
investment opportunities. This encourages investors to keep investing in stocks. The
existence of a positive relationship between PBV ratio and stock price can be shown in two
companies that have been listed on the IDX30 index. In 2018, the PBV ratio of PT Astra
Agros Lestari Tbk (AALI) increased from 1.37 times in 2017 to 5.84 times, and was followed
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by an increase in share price of IDR 13 150 to IDR 51 925. In the same period, the PBV ratio
of PT Adhi Karya Tbk (ADHI) decreased from 1.14 times to 0.92 times, and was followed by
a decrease in share price from IDR 1 885 to IDR 1 585. This indicates a positive relationship
between PBV ratio and stock price, when PBV increases it will also increase stock prices,
and when PBV decreases it will also reduce stock prices.
The Effect of Inflation on Stock Prices
Table 8 shows the inflation coefficient value of 505.60 which interprets that every 1%
increase in inflation will increase the company's stock price on the IDX30 index by Rp505.60
assuming the value of the other independent variables is zero. In addition, the inflation
coefficient also gives a positive direction to stock prices. The probability value of inflation of
0.00 interprets inflation to affect stock prices at the 5% significance level (0.00 <0.05). The
results of this study are in accordance with Alamsjah's research (2017) which shows that the
inflation rate has a positive effect on stock prices. The existence of a positive relationship
between inflation and stock prices can be assumed with demand pull inflation, namely
inflation that occurs due to too strong an increase in demand for goods exceeding the supply
of goods on the market (Sari 2016). According to Monetarist theory, the high demand for
goods is due to the large amount of money circulating in the community, while according to
Keynesian theory it is due to increased consumption expenditure, investment, government
expenditures, and net exports (Ferdiansyah 2011). These conditions can be used as
opportunities by companies by charging large costs to consumers. This will increase the
company's profits and ability to pay high dividends to shareholders, so that it will increase
interest in the company investors in investing in stocks that affect the increase in stock prices.
Based on the research results, inflation in 2014 was higher than in 2015, namely 8.36%
versus 3.35%, and was evidenced by the increase in fuel oil and basic necessities (BI 2019).
The high inflation caused the company's share price on the IDX30 index in 2014 to
experience a higher share price movement than in 2015, namely 461.72 points versus 414.73
points. Based on the conditions of increased demand for goods, when inflation is high it can
indeed illustrate that stock prices are also increasing, but the inflation that occurs must be in a
short period of time and not protracted like the phenomenon of the 1998 Asian financial
crisis. The positive relationship between inflation and stock prices can also be shown in two
companies listed on the IDX30 index. In 2017 inflation increased from 3.02% in 2016 to
3.61%. The increase was followed by an increase in the share price of PT Adaro Energy Tbk
(ADRO) from Rp1 695 in 2017 to Rp1 860 in 2016. PT AKR Corporindo Tbk (AKRA) also
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experienced an increase in share price from Rp6 000 in 2016 to Rp6 350 in 2017.
Effect of Interest Rate on Stock Price
Table 8 shows the interest rate coefficient value of -446.74 which interprets that every
1% increase in interest rates will reduce the company's stock price on the IDX30 index by
Rp446.74 by assuming the value of the other independent variables is zero. In addition, the
interest rate coefficient also provides a negative direction on stock prices. The probability
value of interest rates of 0.00 interprets that interest rates affect stock prices at the 5%
significance level (0.00 <0.05). This is in accordance with the results of Rachmawati's
research (2018) that interest rates have a negative effect on stock prices. The negative effect
between interest rates and stock prices indicates that investors consider interest rates on stock
prices. In addition, companies also pay attention to interest rates in order to improve company
performance including stock price movements. This means that the size of the interest rate
will increase and decrease the stock price. According to Tandelilin (2017) interest rates are a
negative signal to stock prices. An increasing interest rate causes investors to withdraw
investment in the form of shares and move it to investment in the form of savings or deposits
in banking companies. In addition, the interest rate also affects the costs incurred by the
company. This will affect the company's profit and have an impact on stock price
movements. In the 2017-2018 period, the interest rate increased from 4.25% to 6.00%, as a
result almost all share prices listed on the IDX experienced a decline including companies
listed on the IDX30 index. For example, the share price of PT Alam Sutera Realty Tbk
(ASRI) decreased from Rp356 to Rp312. The same period the share price of PT Barito
Pasific Tbk (BRPT) also experienced a decline in share price from Rp590 to Rp242. This
indicates that interest rates and stock prices are related and have an influence on stock prices,
when interest rates increase stock prices also increase.
Effect of Exchange Rate (Rupiah against US Dollar) on Stock Price
Table 8 shows the exchange rate coefficient value of 1.53 which interprets that every
strengthening of the rupiah exchange rate against the US dollar by Rp1 will increase the
company's share price on the IDX30 index by Rp1.53 assuming the value of the other
independent variables is zero. In addition, the exchange rate coefficient also gives a positive
direction to the stock price. The exchange rate probability of 0.00 interprets the exchange rate
to affect stock prices at the 5% significance level (0.00 <0.05). This is in accordance with the
35
research of Wismantara and Darmayanti (2017) which shows that the exchange rate has a
positive effect on the Composite Stock Price Index (JCI). The positive effect of the exchange
rate indicates that investors consider the exchange rate in investing in stocks. In addition,
companies also consider the exchange rate as a payment for transactions in investing
activities. This means that the strengthening and weakening of the rupiah against the dollar
will affect the increase and decrease in stock prices. According to Tandelilin (2017) There is
a positive relationship between the exchange rate and stock prices that the strengthening of
the rupiah exchange rate against foreign currencies is a positive signal for an economy
experiencing inflation. Strengthening and weakening the value of the rupiah against foreign
currencies will affect the cost of importing raw materials for production and the prevailing
interest rate. This will reduce the costs incurred by the company and can increase company
profits, so that demand for shares will increase. The 2017-2018 period saw the exchange rate
weaken from Rp13 548 to Rp14 481 per US dollar, as a result almost all share prices on the
IDX experienced a decline, even many companies that had been listed on the IDX30 index
delisted from the index list. The weakening of the exchange rate can be shown by the share
price of PT Gudang Garam Indonesia Tbk (GGRM) which decreased from IDR83 800 to
IDR83 635. This indicates the relationship and influence of the exchange rate on stock prices,
when the exchange rate weakens the stock price will decrease.
F Test (Simultaneous)
Table 8 shows the probability F-statistic value of 0.00 and the significance level used is
0.05. This shows that the probability F-statistic is smaller than the significance level (0.00
<0.05), so according to the hypothesis accept Ha and reject Ho. Ha is that all financial and
macroeconomic ratio variables including CR, ROE, EPS, DER, PBV, inflation, interest rates,
and exchange rates simultaneously have a significant effect on stock prices in IDX30
companies.
Coefficient of Determination (Adjusted R-Squared)
To see how much influence or contribution is given by financial ratios and
macroeconomic variables including CR, ROE, DER, EPS, PBV inflation, interest rates and
exchange rates to the company's share price on IDX30 can be shown by the adjusted R-
squared value in Table 8. The results show an adjusted R-squared value of 0.9067 or
90.67%. This means that CR, ROE, EPS, DER, inflation, interest rates and exchange rates
have an influence or contribution of 90.67% to the company's share price on IDX30. The
36
shortfall of 9.33% means that there are still other independent variables that affect stock
prices.
Forecasting with Trend Analysis Method
It is important to do a forecast so that it can be used as a benchmark and benchmark in
making a decision. To do forecasting, historical data is needed, for example, if you want to
forecast the inflation rate in 2019, then at least historical data on the inflation rate in 2018 is
needed. In addition, forecasting is not always appropriate or in line with the actual, there may
be a policy or other factors that affect the forecasting.
Forecasting that will be carried out in this study is forecasting the IDX30 company
stock price index to see the movement of company stock prices, inflation, interest rates and
exchange rates. Forecasting is carried out on these three variables, because they are beyond
the company's control and have a significant effect on the company's share price on the
IDX30 index. In addition, all of these variables have a significant effect on the share price of
IDX30 companies.
Forecasting the IDX30 Stock Price Index in 2019
The graph in Figure 5 shows that the trend line (fits) for the IDX30 stock price index
for the 2014-2018 period is increasing, with a data accuracy value of MAPE of 6.34, MAD of
29.85 and MSD of 1 246.34, so a quadratic trend model was chosen in forecasting the stock
price index for 2019. The forecasting results can be shown by looking at the forecast line that
follows the fits line, so it can be said that the IDX30 stock price index experienced an
increase in 2019. In January 2019 the IDX30 stock price index is forecasted at 563.93 points,
in February at 567.38 points, in March at 571.82 points, in April at 575.47 points, in May at
579.40 points and in June at 583.39 points (Appendix 17). The increase in IDX30 stock price
index forecasting in 2019 is in accordance with the IDX's hope to make the IDX30 index a
benchmark index in investing in stocks, and investors can maintain their share ownership in
companies that are consistently listed on the IDX30 index. The results of the IDX30 stock
price index forecasting in the first six months of 2019, compared to the actual stock price
index, generally experienced an increasing trend due to the flow of foreign capital into
Indonesia also increasing. In January 2019, the IDX30 stock price index amounted to 570.79
points, in February it amounted to 552.76 points, in March it amounted to 560.70 points, in
37
April it amounted to 561.36 points, in May it amounted to 541.15 points and in June it
amounted to
556.91 (m.investing.com 2019). The decline in the stock price index in February and May
2019 was due to the sub-optimal performance of companies incorporated in the IDX30 index.
In addition, it was also due to slowing world economic growth accompanied by reduced
global financial market uncertainty. Declining global economic growth and lower commodity
prices have resulted in a decline in Indonesia's export growth, which in turn has affected
household consumption and slowing non-building investment (BI 2019).
Inflation Forecasting in 2019
The graph in Figure 6 shows the trend line (fits) for the inflation rate in the 2014-2018
period is increasing, with a data accuracy value of MAPE of 14.96, MAD of 0.69 and MSD
of 0.95, so a quadratic trend model was chosen in forecasting the inflation rate for 2019. The
forecasting results can be seen that the forecast line follows the fits line, so it can be said that
the movement of the inflation rate has increased for 2019. In January 2019 the inflation rate
is forecasted at 3.09%, in February at 3.09%, in March at 3.09%, in April at 3.09%, in May at
3.10% and in June at 3.10% (Appendix 17). Forecasting results that can be said to be stable in
the first six months of 2019, have a positive impact on the capital market, because inflation
that occurs is less than 10%, so that demand for shares will also increase stock prices. The
results of inflation forecasting in the first six months of 2019, compared to the actual inflation
rate is almost the same trend, which distinguishes the numbers but tends to be relatively the
same. In January 2019 the actual inflation rate was 2.82%, in February it was 2.57%, in March
it was 2.48%, in April it was 2.57%, in May it was 3.32% and in June it was 3.28% (appendix
17). The increase in inflation in April and May was due to an increase in volatile food
inflation and administered price inflation, as the month was approaching the holy month of
Ramadan and also approaching Eid al-Fitr 1440 Hijriyah. However, core inflation is still
classified as stable by BI, so stock price movements can be said to be stable and even tend to
increase (BI 2019).
Forecasting Interest Rates in 2019
The results of interest rate forecasting in 2019 can be shown in Figure 7. The graph in
Figure 7 shows that the trend line (fits) for interest rates for the 2014-2018 period is moving
down, with a data accuracy value of MAPE of 11.21, MAD of 0.65 and MSD of 0.51, so a
quadratic trend model was chosen in forecasting interest rates for 2019. The forecasting
38
results can be seen that the forecast line follows the fits line, so it can be said that the interest
rate movement has increased until the end of December 2019. In January 2019 the interest
rate is forecasted at 4.80%, in February at 4.80%, in March at 4.81%, in April at 4.81%, in
May at 4.82% and in June at 4.83% (Appendix 17). This increase in interest rates does not
need to be watched out by the company, because the increase in the percentage of interest
rates has not changed significantly, so it is still classified as stable and also indicates that
investors are not changing the form of investment into savings or bonds. The results of
interest rate forecasting in the first six months of 2019, compared to the actual inflation rate,
interest rates tend to stabilize at 6% until June 2019. The stability of interest rates is not too
worrying for companies related to the capital market, especially stock investment. For the
results of interest rate forecasting using trend analysis is less appropriate to apply because the
results are much different from the actual. Stable interest rates at 6% also do not burden the
company too much in paying its debt costs in the form of loans from banks or in the form of
bonds.
CONCLUSIONS:
The conclusions from the results of this study are as follows:
1. Based on the research results, the CR, ROE, EPS and PBV variables each have a positive
effect on stock prices. While the DER variable has a negative effect on stock prices.
2. The inflation variable and the rupiah exchange rate against the US dollar each have a
positive effect on stock prices, while the interest rate variable has a negative effect on
stock prices.
3. All financial ratio variables and macroeconomic variables including CR, ROE, EPS,
DER, PBV, inflation, interest rates and exchange rates, together or simultaneously have a
significant effect on stock prices.
4. Independent variables including CR, ROE, EPS, DER, PBV, inflation, interest rates and
exchange rates contribute or influence 90.67%.
5. The forecasting results for the movement of company stock prices on the IDX30 index
and inflation for 2019 have an increasing trend. The results of interest rate forecasting for
2019 are experiencing an increasing trend, but the results of interest rate forecasting are
less targeted, because the actual interest rate for the first six months of 2019 is
significantly different from the forecasting results.
