Asset Allocation in Indonesian Stocks Using Portfolio Robust

Abstract

The mean-variance portfolio has several weaknesses. It does not accommodate the uncertainty of parameters, tends to be sensitive to the changes of parameter input, and tends to be unreliable on extreme observations. Moreover, it cannot accommodate the changes in investor preferences regarding the evidence of abnormal and asymmetric asset return distribution. To overcome these three weaknesses, we can use the robust mean-variance portfolio that is based on the uncertainty of parameters. However, the robust mean-variance portfolio has not included skewness in its optimization. Therefore, here in this paper, we use the robust mean-variance-skewness portfolio which includes skewness in its optimization. So it can be used for the condition where the data return is skewed asymmetric and contains extreme values. An empirical study of robust mean-variance and robust mean-variance-skewness portfolios has been conducted on four banking stocks in Indonesia, i.e AGRS.JK, BTPN.JK, BBNI.JK, and BBCA.JK. The data used in this study is the daily closing price of the company's stock price for the period January 2, 2020 – January 2, 2022 (489 days) obtained from Yahoo! Finance. From the results of the data analysis, it can be concluded that the variance still plays an important role in determining the weight of the allocation of a portfolio. Meanwhile, the large value of skewness leads to the allocation of the same weight for each stock in a portfolio.