Business Economics – Regression Analysis

Effect of Ratio Profitability Return on Asset (ROA) and Return of Equity (ROE) to dividing line Price of PT Bank primordial Asia (BCA) Tbk. Ratio profitability, Return on Asset (ROA) and Return of Equity (ROE), of a firm is used as unmatchable of parameters for investor to decide whether they want to invest or non. The following table consists of ROA and ROE as well as the telephone circuit price of PT Bank Central Asia (BCA) Tbk. , as one of the largest bank in Indonesia, from year of 2002 up to 2011. Table 1. ROA, ROE and stock price of PT Bank Central Asia Tbk. tahun 2002-2011 Year breed Price(Y) ROA(X2) ROE(X2) 2002 2500 2. 17 22. 08 003 3325 2. 36 24. 87 2004 2975 3. 04 32. 52 2005 3400 3. 41 32. 33 2006 5200 3. 43 33. 58 2007 7300 1. 68 16. 47 2008 5778 3. 14 33. 16 2009 5645 3. 17 32. 11 2010 4284 3. 28 31. 23 2011 3674 2. 65 24. 16 Using regression analysis we want to determine the kindred between ROA, ROE and stock price of PT BCA Tbk. In this case, ROA and ROE are th e independent or explanatory changeable (X), while stock price is the dependent variable star that we want to explain (Y). Regression abbreviation SUMMARY OUTPUT Regression Statistics Multiple R 0. 13028475 R Square 0. 016974116 Adjusted R Square -0. 63890422 Standard phantasm 1710. 529517 Observations 10 ANOVA df SS MS F Significance F Regression 2 353656. 3 176828. 15 0. 060435241 0. 941840446 Residual 7 20481378. 6 2925911. 229 Total 9 20835034. 9 Coefficients Standard Error t Stat P- appraise Lower 95% Upper 95% Lower 95. 0% Upper 95. 0% Intercept 5361. 609293 2796. 526605 1. 917238793 0. 096721961 -1251. 125335 11974. 34392 -1251. 125335 11974. 34392 X covariant 1 -142. 3275587 3749. 125063 -0. 037962873 0. 970777259 -9007. 599603 8722. 944486 -9007. 599603 8722. 944486 X Variable 2 -19. 7879081 375. 1702777 -0. 051919867 0. 960043105 -906. 6155278 867. 6579462 -906. 6155278 867. 6579462 From the summary output we can estimate the linear relationship between t he stock price (Y) and ROA (X1), ROE (X2) in the form of equation under Y= 5361. 6092 142. 3275 X1 19. 4788 X2 The run indicates that for each 1% decrease in ROA and ROE the stock price decrease by IDR142. 3275 (the estimated coefficient of X1) and IDR19. 4788 (the estimated coefficient of X2) also, respectively. To understand how significant the independent variable can explain the dependent variable, we can observe from t-stat data.The critical value of t at the 0. 05 level of significance is 2. 365 (from table of the t distribution). The analysis result show that t-stat value below the critical value of t = 2. 365. It means that at the 5% level of significance, we accept there is no significant relationship between ROA, ROE and stock price. We need more variable better than just ROA and ROE to picture the movement of price stock. The two variables, ROA and ROE, are not enough to explain the stock price of PT BCA Tbk. Now, we want to see how good is the model or how much the e xplanatory power of the model by looking at R2 data.R2 measures how much of the variation in the firms stock price is explained by the variation in its ROA and ROE. The analysis result shows that the value of R2 is 0. 016974116, extreme to 1. It means that none of the variation in stock price was explained by the variation in ROA and ROE. In conclusion, looking at the value of t-stat and R2, variable ROA and ROE is not enough to explain the movement of stock price PT BCA Tbk. We need to add more variables to get more description how the stock price change and how significant and sensitive the variables impact to stock price.