CAPITAL ASSET PRICING MODEL (CAPM): THE THEORY AND EVIDENCE IN INDONESIA STOCK EXCHANGE (IDX) AT THE PERIOD 2004-2009

This research aims to examine the validity of the CAPM that was developed by Sharpe [1964] , Litner [1965] , and Mossin [1966] for all of the stock in Indonesia Stock Index (IDX). The study uses monthly stock returns from 213 companies listed on the Indonesia stock Exchange, certificate of Bank Indonesia as rf, and stock price index for seek rm. The sample of this thesis is enterprise who listed in Indonesia Stock Exchange at the period 2004 – 2009 and I got 213 samples. The findings of this research are not supported the theory’s basic statement that higher risk (beta) is associated with higher levels of return. The CAPM’s prediction for the intercept is that it should equal zero, the results of the study refute the above hypothesis and offer evidence against the CAPM theory. Keywords: CAPM, return, risk, , market risk, risk fre