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Composite Behavioral–Fundamental Indexes via PCA for Predicting Indonesia Stock Exchange Excess Returns: An Integrated Anomaly Analysis

In: Proceedings of the 7th International Conference on Applied Economics and Social Science (ICAESS 2025)

Author

Listed:
  • Wina Nurfitriani

    (Universitas Sumatera Utara, Fakultas Vokasi)

  • Syafrita Ridha Ginting

    (Universitas Sumatera Utara, Fakultas Vokasi)

  • Lailan Syafrina Hasibuan

    (Universitas Sumatera Utara, Fakultas Vokasi)

  • Muhammad Simba Sembiring

    (Universitas Sumatera Utara, Fakultas Vokasi)

Abstract

This study integrates traditional valuation metrics and behavioral sentiment indicators into a composite framework to predict excess returns on the Indonesia Stock Exchange (IDX). Seven proxies—price-to-book value, price-to-earnings, turnover ratio, consumer confidence, global sentiment, Fear & Greed Index, and VIX—were standardized and subjected to Principal Component Analysis (PCA), yielding two orthogonal factors: a fundamental valuation factor and a behavioral sentiment factor. These factors explain 46.9% of total variance and were used as predictors in a multiple regression model for IDX excess return. Regression results show both factors have significant negative impacts on returns (β = –0.382, p

Suggested Citation

  • Wina Nurfitriani & Syafrita Ridha Ginting & Lailan Syafrina Hasibuan & Muhammad Simba Sembiring, 2026. "Composite Behavioral–Fundamental Indexes via PCA for Predicting Indonesia Stock Exchange Excess Returns: An Integrated Anomaly Analysis," Advances in Economics, Business and Management Research, in: Jessica Olifia & Dewi Junita & Aprizal Putra & Susi Lestari & Sarah Ulfah Al Amany & Syafri Naldi (ed.), Proceedings of the 7th International Conference on Applied Economics and Social Science (ICAESS 2025), pages 567-583, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-990-2_38
    DOI: 10.2991/978-94-6463-990-2_38
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