INVESTMENT RISK MANAGEMENT AT COAL MINING COMPANIES IN INDONESIA USING QUANTITATIVE METHODS: A CASE STUDY OF STOCK PRICES FOR THE CALENDAR YEAR OF 2018 - 2022

• Main Author: Eurico Christanto, Yohannes
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/76986
• Institution: Institut Teknologi Bandung

Coal mining has become one of the strategic industries for economic growth in Indonesia. Stock investment in the coal mining industry is a high-risk activity. Previous studies have stated that COVID-19 has hurt the country's stock market. Therefore, risk management is needed for stock investment in coal mining companies in Indonesia in the form of both single assets and portfolios. This study aims to determine risk quantification and the optimal portfolio alternative in stock investment in coal mining companies in Indonesia in the calendar year of 2018 – 2022. Various quantitative methods are used to measure investment risk, including standard deviation, beta and R-squared, capital asset pricing model (CAPM) and Jensen's alpha/alpha, Sharpe ratio, Sortino ratio, Treynor ratio, and value at risk (VaR) at 95% and 99% confidence interval. Efficient frontier methods based on the Markowitz model are also used to determine optimal portfolio alternatives. The calculation using various quantitative methods was carried out on historical data on monthly closing prices of eight samples of coal mining companies in Indonesia (ADRO, BSSR, BYAN, PTBA, HRUM, INDY, ITMG, and MBAP), stock indices consisting of composite and sectoral indices (energy sector), as well as risk-free rate referring to the benchmark interest rate issued by Bank Indonesia. Data processing and analysis show that the sample stocks of coal mining companies in Indonesia other than INDY have performed quite well compared to the performance of the composite index. In addition, the eight sample stocks of the companies tend to be less good compared to the performance of the energy sector index in the last five years based on their total risk approach. Optimal portfolio alternatives were obtained for each risk-averse and risk-taker investor historically five years heretofore. An optimal portfolio alternative for risk-averse investors with a combination of BSSR 24.18%, BYAN 41.78%, PTBA 16.40%, HRUM 1.88%, and MBAP 15.75% provides an arithmetic average of return, standard deviation, and monthly Sharpe ratio of 1.67%, 6.63%, and 19.58% respectively, during which the optimal portfolio alternative for risk-taker investors with a combination of BSSR 27.71%, BYAN 44.38%, HRUM 18.50%, and MBAP 9.40% provides an arithmetic average of return, standard deviation, and monthly Sharpe ratio of 2.03%, 7.11%, and 23.33% respectively.