OPTIMIZING INVESTMENT PORTFOLIO AN IN-DEPTH CASE STUDY OF SELECTED INDONESIA STOCK MARKET AND GOLD INVESTMENT FOR PERIOD 2008-2022

• Main Author: Sulistyana, Hari
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/80320
• Institution: Institut Teknologi Bandung

This final project provides a rigorous empirical analysis of portfolio optimization utilizing the Sharpe ratio on Gold asset and some selected Indonesian stock market based on basic ratio of fundamental analysis (TOWR, PTBA, INKP and ITMG). The study attaches real data spanning from 2008 to 2017 to define portfolio allocations based on the Sharpe ratio. Subsequently, these allocations are back tested against the market data from 2018 to 2022, utilizing various investment strategies: No rebalancing, yearly rebalancing, six-monthly rebalancing and 3-monthly rebalancing, with the aim of concluding the most profitable strategy. This rebalancing strategy was assumed no transaction fee and to simplify the calculation. The study employs a robust methodology, systematically analyzing historical returns, volatility, and correlations of chosen stocks listed on the Indonesia Stock Exchange (IDX) and gold asset prices. By leveraging modern portfolio theory (MPT) and the Sharpe ratio, optimal portfolio allocations are distinguished for the first study period (2008-2017), which form the basis for the subsequent back testing phase. In the backtesting phase, the determined portfolio allocations are tested against actual market developments from 2018 to 2022. The study scrutinizes the performance of each portfolio under the four distinct rebalancing strategies to ascertain their impact on the portfolio’s riskadjusted returns. The aim is to identify which strategy yields the highest profitability while effectively managing risk, particularly in the dynamic and often volatile context of the Indonesian financial market. The findings of this research are anticipated to reveal crucial understandings into the effectiveness of different rebalancing strategies in enhancing portfolio performance. The study provides a detailed comparative analysis of the realized profits and risk-adjusted returns of each strategy, offering valuable recommendations for investors seeking to optimize their portfolios within the Indonesian stock market and gold assets. In conclusion, the 6-month rebalancing was the best strategy giving highest return with minimum risks based on composition defined from Sharpe ratio methodology.