Open AccessFormation of stock portfolio using Markowitz method and measurement of Value at Risk based on generalized extreme value (Case study: company’s stock The IDX Top Ten Blue 2017, Period 2 January - 29 December 2017)
Author(s) -
Ria Epelina Situmorang,
Di Asih I Maruddani,
Rukun Santoso
Publication year - 2019
Publication title -
journal of physics. conference series
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.21
H-Index - 85
eISSN - 1742-6596
pISSN - 1742-6588
DOI - 10.1088/1742-6596/1217/1/012084
Subject(s) - portfolio , rate of return on a portfolio , sharpe ratio , econometrics , stock (firearms) , economics , portfolio optimization , financial economics , extreme value theory , capitalization weighted index , rate of return , modern portfolio theory , actuarial science , stock market index , statistics , mathematics , finance , stock market , geography , archaeology , context (archaeology)
In financial investment, investors will try to minimize risk and increase returns for portfolio formation. One method of forming an optimal portfolio is the Markowitz method. This method can reduce the risk and increase returns. The performance portfolio is measured using the Sharpe index. Value at Risk (VaR) is an estimate of the maximum loss that will be experienced in a certain time period and confidence level. The characteristics of financial data are the extreme values that are alleged to have a heavy tail and cause financial risk to be very large. The existence of extreme values can be model Generalized Extreme Value (GEV). This study uses company stock data of The IDX Top Ten Blue 2017 which forms an optimal portfolio that is a combination of TLKM and BMRI shares with the expected return rate of 0.0111 and a standard deviation of 0.01057. Portfolio performance measured by the Sharpe index is 1.6190 indicating the return obtained from investing in the portfolio above the average risk-free investment return rate of -0.01010. Risk calculation is obtained based on Generalized Extreme Value (GEV) if you invest both of these stocks with a 95% confidence level is 0.206 or 2.06% of the current assets.