Kurtosis and Skewness on Lagged Market Risk Premium in Indonesian Market During Covid 19 Pandemic

Abstract

This study investigates the impact of return distribution such as skewness and kurtosis on lagged market risk premium to risk premium in Indonesia capital market during COVID-19 pandemic. Data are monthly, from january to December 2020, and 674 firms. Panel data predictive regression is used The method  For this study, I first looked for market risk premium and risk premium desripitives. Second, I used monthly panel data predictive regression from lagged market risk premium and risk premium in 2020. Third, I incorporate skewness and kurtosis simultaneously. Fourth, I exclude kurtosis or skewness in previous model. The results are market risk premium and risk premium having negative return. Risk premium has lower returns than market risk premium. The beta lagged market risk premium is significant to risk premium. The skewness and kurtosis market risk premium do not signify to risk premium together but significant separately. I can clonclude that the movement market risk premim and risk premium during COVID-19 pandemic are average negative. Beta lagged market risk premium can explain the future monthly risk premium. Contrary skewness and kurtosis, those can not be run together. When the model used to beta lagged market risk premium and skewness, partially the skewness was significant and the direction was positive. However, only beta lagged market risk premium and kurtosis were staying negative to the previous model. Incorporating lagged assumptive distribution only explain the risk premium under 1 % about 0.24%.