Risk Pricing and Investment Efficiency in Indonesia’s Sustainable Mining Industry

Abstract

The mining sector has become one of the most strategically important industries in Indonesia, supported by abundant mineral reserves, downstream industrialization policies, and increasing global demand for energy-transition commodities. Despite its significant contribution to economic growth and capital market development, mining stocks remain highly exposed to systematic risk arising from commodity price volatility, macroeconomic uncertainty, and regulatory changes. Existing studies applying the Capital Asset Pricing Model (CAPM) in Indonesia have predominantly focused on broad market indices such as LQ45, IDX30, and JII70, while limited attention has been devoted to sector-specific analyses covering a complete economic cycle. This study aims to evaluate the relationship between systematic risk and stock returns and determine investment feasibility among mining companies listed on the Indonesia Stock Exchange during the 2019–2024 period. Employing a quantitative descriptive design, the study analyzes 37 mining firms selected through purposive sampling. Expected returns are estimated using the Capital Asset Pricing Model by incorporating individual stock returns, market returns, risk-free rates, and beta coefficients. The findings reveal that the mining sector exhibits an aggressive risk profile with an average beta coefficient of 1.19 and an average realized return of 1.87%, supporting the high-risk–high-return proposition. Furthermore, Security Market Line analysis identifies 32 stocks as efficient (undervalued) and five stocks as inefficient (overvalued). The study contributes to asset-pricing literature by providing sector-specific evidence across multiple economic regimes, including pre-pandemic stability, pandemic disruption, and post-pandemic recovery. The findings offer practical guidance for investors seeking to identify undervalued mining stocks and optimize portfolio allocation decisions under varying market conditions in emerging markets.