Analysis of Optimal Portfolio Formation Using Single Index Model and Stochastic Dominance on Sri-Kehati Index

Abstract

This study directly applies the Single Index Model and Stochastic Dominance to solve the portfolio selection problem. This study aims to determine the difference in performance between the Single Index Model and Stochastic Dominance. The use of secondary data was used in this study by selecting the sample using the purposive sampling technique. If viewed based on the portfolio return, the single-index model can produce a portfolio return of (1.548%) and a stochastic dominance return of (0.888%). The results show that the value of the Stochastic Dominance portfolio formation has a Treynor index which is 2.22% higher than the Single Index Model with a Treynor index of 2.09%.