ABSTRACT: The objective of this research is to examine correlation between IOS as growth proxy of a company and stock return. IOS proxy variables as growth proxy in this re-search are MKTBASS,MKTBKEQ, CAPBVA, and EPS/ Price Ratio. These variables are correlated with stocks returns that are surrogated by CAR (cumulative abnormal return) in around date of final statement publication for each company. CAR computation use corrected stock beta by using Fowler and Rorke (1983) method, with four days before and after correction period. Therefore, stock return computations that are accumulated during event period use corrected beta. Correlation test are done by Kendall”s Tau_b non parametric correlation model. Sample is chosed by purposive sampling method during 3 years observation. Assuming that IOS proxy variables are valid growth proxies, and one of sampling criteria is the company does not have null return during event period and return estimation periods The results of non parametric correlation test with Kendall”s Tau_b test indicate that MKTBASS has significant correlation with CAR. MKTBKEQ and CAPBVA have marginal significant correlation with CAR.EPS/Price ratio does not has significant correlation with CAR. These mean that generally these three IOS proxy variables that are stated as the most valid proxies as growth proxy, have correlation with opportunities to obtain abnormal return. Therefore, these IOS proxies have information content that can be used by investors as decision making tool in capital market because these can give positive  signal to stock return. EPS/price IOS proxy has insignificant negative correlation with CAR, so this proxy does not influence stock abnormal return.The result of this research contributes for capital market investor and also for  the previous researchs that IOS proxy variables are rigorous and have relation to abnormal return.
Keywords: investment opportunity set, IOS Proxy, Nonparametric Correlations Kendall”s Tau_b, Stock Beta, Abnormal return and Cummulative abnormal return
Penulis: Agustina M.V Norpratiwi
Kode Jurnal: jpmanajemendd070026
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