A COMPARISON OF MARKOWITZ, SINGLE INDEX AND MULTI INDEX MODELS TO CREATE AN OPTIMAL PORTFOLIO A CASE STUDY OF LQ45 STOCKS FOR THE PERIOD OF 2017-2021

• Main Author: Rinaldi Wandaru, Rizky
• Format: Theses
• Language: Indonesia
• Subjects: Manajemen umum
• Online Access: https://digilib.itb.ac.id/gdl/view/69899
• Institution: Institut Teknologi Bandung

In general, investors seek a high return with less risk. Optimal Portfolio is a diversification method to identify the stocks in a portfolio that generates the highest return with acceptable risk. In this study, the level of expected return and consequent risk are compared between the outcomes of the optimal portfolio construction using the Markowitz model, the Single Index model and the Multi Index model approach. The study's five-year time frame is from 2017 to 2021. LQ45 Stock Index are used as the research population. Stock screening was utilized in order to collect stocks population that consistently registered in LQ45 Stock Index for the last five years. The total stocks population in this research are 38 stocks and were analyzed into 3 analytical tools mentioned above. The result of analysis shows optimal portfolios constructed from a combination of 11 stocks. The Single Index Model portfolio become the most superior with an expected weekly return of 1.05% and risk of 3.74%, followed by the less superior Multi Index Model with an expected weekly return of 0.87% and risk of 3.37%, while the least superior portfolio is by Markowitz Model with an expected return of 0.76% and risk of 3.72%. The comparison of performance metrics using Sharpe Ratio, Treynor Ratio and Jensen’s Alpha; also show similar result, where Single Index Model portfolio has the highest ratios from all the one-parameter performance measures, followed by Multi Index and Markowitz Model. This can be interpreted to mean that the Single Index Model is most suitable analytical tool to build an optimal portfolio in the Indonesian Stock Market.