CAPM-Based Investment Decisions In The Under-Researched Indonesian Business Support Services Sector

Abstract

Accurately valuing stocks is crucial for maximizing investment returns. This study employs the Capital Asset Pricing Model (CAPM) to assess potential undervaluation within the Indonesian Business Support Services sector. The CAPM model is utilized to calculate the expected return of each stock, taking into account its risk relative to the market as a whole. By comparing the actual stock returns observed during the study period with the CAPM-calculated expected returns, the study identifies potential discrepancies that may indicate undervaluation or overvaluation in the market. We analyze four companies listed on the Indonesia Stock Exchange (IDX) from April 2023 to March 2024. Our findings reveal that all four companies exhibit stock returns. Encouragingly, no evidence of overvaluation was found within the sample. The implications of these findings are significant for investors seeking opportunities in the Indonesian Business Support Services sector. This identification suggests that these stocks may not offer attractive investment opportunities with the prospect of generating higher returns than predicted by the CAPM model, While this study sheds light on potential investment opportunities, limitations include the one-year timeframe and the focus on a specific sector.