Liquidity Premium Foreign and Domestic Investor in Indonesian Stock Market

This research use Fama- French 3 Factor Model as basic model to measure excess return and adding illiquidity factor which categorized on Foreign and Domestic in Sell and Buy Transaction constructed with Amihud illiquidity by volume transaction basis. This research find evidence the effect form market beta, size factor, value factor, and foreign-domestic buy and sell illiquidity in Indonesia Stock Exchange. The research period 2010 - 2018 with weekly data uses OLS regression. The result show market beta, SMB (size factor), and HML (value factor) have positive significant effect to excess return. It is indicating market movement have effect in return in Indonesian Stock Exchange. Small and high value firm is considered better performance. In two model regression, sell-side and buy-side models foreign variable have significant positive value. It is indicating foreign investor better performance and want more premium on illiquid stock. According to Dvorak (2005) foreign investors tend to reluctance on small and illiquid stocks, then expect more premium to invest in illiquid stock.