Analysis of Value at Risk of Optimal Portfolio Forming Using Single Index Model on LQ45 Stock Index in 2018 and 2019

Edwin Setiawan Nugraha, Tera Savera, Fauziah Nur Fahirah Sudding, Mokhammad Ridwan Yudhanegara

Abstract


In contemporary society, investment has emerged as a prevalent activity, encompassing the buying and selling of assets to yield profits. A fundamental concept in investment is the portfolio, which comprises two or more stocks. By diversifying their investments across a portfolio, investors can reduce the risks associated with holding a single stock. This research aims to analyse and construct an optimal portfolio for companies listed on the LQ45 index during the period from 2018 to 2019, utilizing the Single Index Model. An optimal portfolio is characterized by lower risk and higher returns. Additionally, this study calculates the Value at Risk (VaR) for each company that meets the portfolio criteria, employing a historical method. The findings reveal that the optimal stock portfolio consists of BBCA, BRPT, ICBP, TPIA, MNCN, and EXCL, achieving a return rate of 2.95% and a risk measure of 0.0099. The allocation of the portfolio is as follows: BBCA (38.03%), BRPT (26.43%), ICBP (17.25%), TPIA (13.62%), MNCN (3.31%), and EXCL (1.37%). At the 95% and 99% confidence levels, the portfolio exhibits a superior VaR compared to individual assets, with values of IDR 4,213,118.10 and IDR 5,560,936.56, respectively, based on an initial investment of IDR 100,000,000. The VaR provides critical insights for investors in determining the appropriate proportions and combinations of shares within their portfolios.

Keywords


Stock, Investment, Optimal Portfolio, Single Index Model, Value at Risk.

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DOI: http://dx.doi.org/10.33021/firm.v9i2.5556

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