Analysis of Optimal Stock Portfolio Investment on The LQ45 Index Using the Markowitz Model and Single Index Model

Abstract

This Markowitz model can overcome the weakness of random diversification. The assumption that increasing the number of shares in a portfolio continuously will provide greater benefits is different from the Markowitz model. This model believes that the addition of stocks continuously in one portfolio, at a certain point, will further reduce the benefits of diversification and will increase the level of risk (Tandelilin, 2010). The Markowitz portfolio also provides quite efficient results because it has a positive expected return value from each portfolio (Supriyadi and Hadmar, 2009). Single Ithe single model is one method for forming a portfolio that can be used by investors. The optimal portfolio analysis technique using the Single Index Model is a security analysis technique that is carried out by comparing the excess return to beta (ERB) to the cut off rate (Ci) of each stock. This study uses a population of issuers that are included in the LQ45 calculation for the period February 2018 - July 2020 with a total sample using the purposive sampling method of 31 samples. Based on the optimal portfolio formation of the Markowitz Model, 4 stocks form a portfolio exexpectedeturn of 0.0074 while for portfolio risk of 0.0428 and the proportion of funds formed is BBCA 50.81%, E XCL 9.83%, ICBP 30, 59%, and KL B F 8, 77. The formation of a single index model portfolio obtained 2 optimal portfolio formations with a portfolio return of 0.1486 and a risk of 0.0873 while the proportion of funds formed by ANTM was 10.5%, and BBCA was 89.5%. Based on the results of the study proves that the single index model can generate a profit of 14.86% with a risk level of 8.73% compared to the Risk-Free Assets Return rate of 5.17%. Meanwhile, the Markowitz model can generate a portfolio return of 0.74% with a portfolio risk of 4.28% not providing optimal returns because the expected return from the Markowitz model portfolio is lower than the Risk-Free Asset Return Rate. Keywords: Markowitz Model, Single Index Model, Portfolio Optimal, Stock