OPTIMAL FORMATION PORTFOLIO: AN ANALYSIS USING THE MARKOWITZ AND SINGLE INDEX MODEL FOR IDX30 STOCK PERIOD (2016-2021)

• Main Author: Alexander Hehuwat, Rama
• Format: Theses
• Language: Indonesia
• Subjects: Manajemen umum
• Online Access: https://digilib.itb.ac.id/gdl/view/62633
• Institution: Institut Teknologi Bandung

This research paper aims to evaluate the performance of the stocks listed in the IDX30 throughout five years (from December 2015 to December 2020). The evaluation of the IDX30 stocks is done by analysing the value of each stock through its risk and return to then bring forth an optimum portfolio. In order to come up with an optimum portfolio, the evaluation of the 17 stocks can be calculated through two methods which are the Markowitz Model and the Single Index Model. Based on the diversification of the portfolio, the Markowitz model calculates the covariance using a complex variance-covariance relationship, whereas the Single Index Model is calculated using both market risk and the firm’s unsystematic risk. Aside from that, this paper also aims to answer the question of whether the portfolios presented in this research provide an outcome that surpasses the Jakarta Composite Index (JCI). To elucidate, JCI is a statistical measure that reflects the overall price movement of a group of stocks selected based on certain criteria and methodologies and evaluated periodically. Generally, JCI is used as a benchmark to discern the changes in the global investment market. However, for this research paper, JCI will play the role as an indicator of the stock market performance in Indonesia. The JCI is often used as one of the main references in making decisions for stock and mutual fund investors, precisely as a standard to sell or buy securities in the capital market. Hence, in this research paper, it is critical to take into account the role of JCI and analyse the stock performance outcome through whether or not it surpasses the JCI. In pursuance of research validity and reliability, it is critically important to take into consideration and evaluate the COVID-19 pandemic and the negative effects it created towards the overarching factors such as the economy, the Gross Domestic Product (GDP), the stock market, all in all the country of Indonesia altogether as all these important factors have a direct effect on the stocks evaluated. Hence, the role of the pandemic should not be neglected and be taken into account in the evaluation of these stocks. The findings of this research show that the Markowitz model produces 16 portfolio simulations with one optimum portfolio: Portfolio 2 with a return of 17.68% annually, and a standard deviation of 18.65%. On the other hand, the Single Index Method produces a portfolio with a return of 33.6% annually. Both models consistently produce results that show sectors with the potential of providing benefits. These sectors include the banking and finance sector, as well as the mining industry. Hence, through this research, it can be deduced that as the Single Index Method evaluates more stocks, it also conveys better overall performance with higher returns and lower risks than the stocks evaluated by the Markowitz Model. However, the findings also convey that the calculation of the return presented by both Markowitz and Single Index methods is higher than JCI, hence showing that stock performance is more secure and less penetrable within the risk-free market.