The Comparison of Optimal Portfolio Formation Analysis with Single Index Model and Capital Asset Pricing Model in Making Investment Decision

Abstract

This research aims to find out the portfolio comparison that results from Single Index Model and Capital Asset Pricing Model methods, also portfolio performance evaluation results from Sharpe Index, Treynor Index, and Jensen Index on stocks listed in the LQ45 Index from 2017-2019. Samples taken consisted of 17 shares of companies listed on the LQ45 Index successively and it has a positive average return. Analysis using the Single Index Model method produces an optimal portfolio consisting of 6 shares. Whereas the Capital Asset Pricing Model method produces an efficient portfolio consisted of 13 shares. Portfolio performance evaluation created from both methods results from the rank of shares from each portfolio also has a positive average index, that means shares consisted of these portfolios are worth to be invested.