Estimating systematic risk for the best investment decisions on manufacturing company in Indonesia

Abstract

Estimation of systematic risk is one of the important aspects of the best investment decisions. Through systematic risk prediction will be known risks to be faced by investors, because systematic risk is a measure of investment risk. In addition to returns, investors always consider the risk of investment, because investors are rational individuals, ie individuals who always consider the trade-off between return and risk. At a certain level of return, investors will tend to choose investments with the lowest risk level. Conversely, at a certain level of risk, investors tend to choose investments with the highest return rate. The purpose of this paper is to analyze the influence of the financial information on the systematic risk of stock manufacturing companies listed on the Indonesia Stock Exchange over a period of five years from January 2011 to December 2015. The financial information is measured in four accounting variables, i.e. financial leverage, liquidity, profitability, and firm size. The results of data analysis using multiple linear regression method to prove that at the 0.05 level only variable sized companies that significantly influence systematic risk. Meanwhile, the variable financial leverage, liquidity, and profitability does not affect the systematic risk. The results showed inconsistencies with the results of several previous studies. This inconsistency may be due to measurement problems variable accounting, the implementation period of the study, and the use of different research samples.