Track: Financial Engineering

Abstract

To reduce the level of investment risk, investors need to be verified through the formation of a portfolio by combining several assets to minimize risk. The purpose of this study is to determine the optimal portfolio formation through the Single Index model and the Capital Asset Pricing Model (CAPM) and to determine the performance comparison of the two models using the Sharpe Index, Jensen Index, and Treynor Index.

The results of this study indicate that there are 21 stocks included in the optimal portfolio using the Single Index Model and 50 stocks included in the optimal portfolio using CAPM. The evaluation of portfolio formation with the Single Index Model are using the Sharpe, Jensen, and Treynor Indices has a positive value which indicates that portfolio formation is considered good and worthy of consideration by investors to invest in the optimal portfolios. CAPM portfolio evaluation with the Sharpe and Treynor Index has a positive value, while the Jensen Index shows a negative value.