Portfolio Optimization of the Mean-Absolute Deviation Model of Some Stocks using the Singular Covariance Matrix
Kalfin1, Sukono2, Ema Carnia3
1Kalfin, Master Program in Mathematics, Faculty of Mathematics and Natural Sciences, Universitas Padjadjaran, Indonesia.
2Sukono, Department of Mathematics, Faculty of Mathematics and Natural Sciences, Universitas Padjadjaran, Bandung, Indonesia.
3Ema Carnia, Department of Mathematics, Faculty of Mathematics and Natural Sciences, Universitas Padjadjaran, Bandung, Indonesia.
Manuscript received on 11 August 2019. | Revised Manuscript received on 17 August 2019. | Manuscript published on 30 September 2019. | PP: 7818-7822 | Volume-8 Issue-3 September 2019 | Retrieval Number: C6363098319/2019©BEIESP | DOI: 10.35940/ijrte.C6363.098319
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© The Authors. Blue Eyes Intelligence Engineering and Sciences Publication (BEIESP). This is an open access article under the CC-BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/)
Abstract: Investing in the stock sector, investors often face risk problems. Usually, forming an investment portfolio is done to minimize risk. In this research, investment portfolio optimization is discussed. The data analyzed are 8 shares traded on the capital market in Indonesia through the Indonesia Stock Exchange (IDX). Optimization is performed using the Mean-Absolute Deviation model with the singular covariance matrix to determine the optimal weights. The results of portfolio optimization Mean-Absolute Deviation model with singular covariance matrix method, was obtained optimal portfolio weights that is of 17.22% for BBCA shares; 26.64% for TKIM shares; 9.96% for BBRI shares; 9.96% for BBNI shares; 8.70% for BMRI shares; 3.75% for ADRO shares; 6.52% for GGRM shares; and 17.25% for UNTR shares. Where the optimal portfolio composition is obtained the expected rate of return (expected return) of 0.18% with a portfolio risk level (standard deviation) of 0.07%.
Index Terms: Return, Risk, Mean-Standard Deviation Model, Singular Covariance Matrix Method, Surface Efficient.
Scope of the Article: Design Optimization of Structures