Analysis of the Optimal Portfolio Performance Comparison Formed from the LQ45 Index Shares with the Mandiri Investa Equity ASEAN 5 Plus Mutual Funds Portfolio
Introduction
The growth in the number of investors in the Indonesian capital market has shown a significant potential to increase the capacity of the capital market. Among various investment instruments in the stock market, shares are one of the most traded. Participation of local investors in capital market investment is usually driven by the hope of gaining profits or returns, although the risks attached to investment instruments also need to be taken into account. Risks in stock investment can be minimized by diversification through optimal portfolio formation.
In this article, we aim to analyze and compare the performance of two types of portfolios: Portfolios formed from shares listed in the LQ45 index and Mandiri Mandiri Investa Equity ASEAN 5 Plus Portfolio. This research is descriptive with a quantitative approach, using all shares included in the LQ45 index as a population and 41 shares selected as a sample using purposive sampling technique. The data used in this analysis are secondary, obtained through documentation techniques.
Portfolio Formation Method
In the formation of a portfolio, two models are used, namely the Single Index Model and Constant Correlation Model. The Single Index Model is a widely used model in portfolio formation, which assumes that the returns of all assets are correlated with a single market index. On the other hand, the Constant Correlation Model assumes that the correlations between assets are constant over time.
To measure the performance of each portfolio, three sizes are used, namely the Sharpe Index, Treynor Index, and Jensen Alpha. Each measure has a different approach in assessing the results of the results relative to the risk taken.
Sharpe Index : This measure calculates the excess return of a portfolio over the risk-free rate, relative to its volatility. It is a widely used measure of portfolio performance, which takes into account both the return and risk of the portfolio.Treynor Index : This measure calculates the excess return of a portfolio over the risk-free rate, relative to its beta. It is a measure of portfolio performance that takes into account the risk of the portfolio, but not its volatility.Jensen Alpha : This measure calculates the excess return of a portfolio over the market return, relative to its beta. It is a measure of portfolio performance that takes into account the risk of the portfolio, but not its volatility.
Portfolio Performance and Analysis
Based on the measurement results, the portfolio formed from LQ45 shares using a single index model shows a lower performance compared to the portfolio formed using the Constant Correlation Model. However, when viewed from the Treynor Index, the LQ45 portfolio with a single index model shows better performance than the Mandiri Investa Equity ASEAN 5 Plus Mutual Funds Portfolio.
On the other hand, when using the Sharpe Index and Jensen Alpha, the portfolio performance formed from LQ45 shares with a single index model again shows lower results than the mutual fund portfolio. The same thing happened in a portfolio formed with the Constant Correlation Model, where this portfolio shows better performance according to the Treynor Index but is lower when measured by the Sharpe Index and Jensen Alpha compared to Mandiri Investa Equity ASEAN 5 Plus.
Conclusion and Relevance
From the analysis above, it appears that the selection of models in the formation of portfolios greatly affects investment performance. Portfolios formed from shares in the LQ45 index using Constant Correlation Model provide varied results depending on the measurement size used. For investors who prefer lower risks, diversification through mutual funds such as Mandiri Investa Equity ASEAN 5 Plus can be a safer choice even though the results may not be as high as the diversified individual portfolio from LQ45 shares.
This study provides a clear picture for investors on how to optimize their portfolio, both with direct and mutual funds. This is important to understand market dynamics and make better investment decisions.
Resource
Ichsan, et al. (2013). "Stock trading in the Indonesian capital market: potential and challenges." Financial Services Authority (OJK) regulations related to investment and portfolio management. Mandiri Mandiri Investa Equity ASEAN 5 Plus Mutual Funds Report.
Limitation
This study has several limitations. Firstly, the data used in this analysis are secondary, obtained through documentation techniques. This may limit the accuracy and reliability of the results. Secondly, the sample size used in this study is limited to 41 shares, which may not be representative of the entire LQ45 index. Finally, the study only compares the performance of two types of portfolios, which may not be comprehensive.
Future Research
Future research can build on this study by exploring other portfolio formation models and measurement sizes. Additionally, future research can investigate the impact of other factors, such as market conditions and economic indicators, on portfolio performance.
Conclusion
In conclusion, this study provides a comprehensive analysis of the optimal portfolio performance comparison formed from the LQ45 index shares with the Mandiri Investa Equity ASEAN 5 Plus Mutual Funds portfolio. The results show that the selection of models in the formation of portfolios greatly affects investment performance. Portfolios formed from shares in the LQ45 index using Constant Correlation Model provide varied results depending on the measurement size used. For investors who prefer lower risks, diversification through mutual funds such as Mandiri Investa Equity ASEAN 5 Plus can be a safer choice even though the results may not be as high as the diversified individual portfolio from LQ45 shares.
This study provides a clear picture for investors on how to optimize their portfolio, both with direct and mutual funds. This is important to understand market dynamics and make better investment decisions.Frequently Asked Questions (FAQs) about Optimal Portfolio Performance Comparison
Q: What is the LQ45 index and how is it used in portfolio formation?
A: The LQ45 index is a stock market index in Indonesia that consists of 45 shares of the largest and most liquid companies listed on the Indonesia Stock Exchange (IDX). It is used as a benchmark for portfolio formation and performance evaluation.
Q: What is the Mandiri Investa Equity ASEAN 5 Plus Mutual Funds Portfolio and how does it differ from the LQ45 index?
A: The Mandiri Investa Equity ASEAN 5 Plus Mutual Funds Portfolio is a type of mutual fund that invests in shares of companies listed on the stock exchanges of ASEAN 5 countries (Indonesia, Malaysia, the Philippines, Singapore, and Thailand). It differs from the LQ45 index in that it is a diversified portfolio that invests in a broader range of companies and markets.
Q: What are the key differences between the Single Index Model and the Constant Correlation Model in portfolio formation?
A: The Single Index Model assumes that the returns of all assets are correlated with a single market index, while the Constant Correlation Model assumes that the correlations between assets are constant over time. The Single Index Model is a widely used model in portfolio formation, while the Constant Correlation Model is a more advanced model that takes into account the correlations between assets.
Q: What are the Sharpe Index, Treynor Index, and Jensen Alpha, and how are they used to measure portfolio performance?
A: The Sharpe Index, Treynor Index, and Jensen Alpha are measures of portfolio performance that take into account both the return and risk of the portfolio. The Sharpe Index calculates the excess return of a portfolio over the risk-free rate, relative to its volatility. The Treynor Index calculates the excess return of a portfolio over the risk-free rate, relative to its beta. The Jensen Alpha calculates the excess return of a portfolio over the market return, relative to its beta.
Q: What are the implications of the study's findings for investors?
A: The study's findings suggest that the selection of models in the formation of portfolios greatly affects investment performance. Portfolios formed from shares in the LQ45 index using Constant Correlation Model provide varied results depending on the measurement size used. For investors who prefer lower risks, diversification through mutual funds such as Mandiri Investa Equity ASEAN 5 Plus can be a safer choice even though the results may not be as high as the diversified individual portfolio from LQ45 shares.
Q: What are the limitations of the study and how can future research build on this study?
A: The study has several limitations, including the use of secondary data and a limited sample size. Future research can build on this study by exploring other portfolio formation models and measurement sizes, as well as investigating the impact of other factors, such as market conditions and economic indicators, on portfolio performance.
Q: What are the key takeaways from the study for investors and financial professionals?
A: The study provides a clear picture for investors on how to optimize their portfolio, both with direct and mutual funds. This is important to understand market dynamics and make better investment decisions. The study also highlights the importance of considering the selection of models in the formation of portfolios and the use of diversified portfolios to minimize risk.
Q: What are the implications of the study's findings for the Indonesian capital market?
A: The study's findings suggest that the Indonesian capital market has a significant potential for growth and development. The study's findings also highlight the importance of diversification and the use of mutual funds as a safer choice for investors who prefer lower risks.
Q: What are the future research directions for this study?
A: Future research can build on this study by exploring other portfolio formation models and measurement sizes, as well as investigating the impact of other factors, such as market conditions and economic indicators, on portfolio performance. Future research can also investigate the implications of the study's findings for the Indonesian capital market and the use of diversified portfolios in minimizing risk.