Implementation of Capital Asset Pricing Model in Optimal Portfolio Formation on IDX High Dividend 20

Cellyn Auditiyah; Yuniar Farida; Wika Dianita Utami

doi:10.31764/jtam.v9i1.27799

Implementation of Capital Asset Pricing Model in Optimal Portfolio Formation on IDX High Dividend 20

Cellyn Auditiyah, Yuniar Farida, Wika Dianita Utami

Abstract

The IDX High Dividend 20 (IDX HIDIV20) is an Indonesian stock index known for its high dividend payouts, appealing to passive income investors. However, annual changes and fluctuating stock prices present challenges, necessitating diversification strategies. This study aims to create an optimal portfolio to balance returns and risks amidst market volatility on the IDX High Dividend 20 stock index. This research uses the Capital Asset Pricing Model (CAPM) method. The CAPM determines the relationship between risk and an asset's expected rate of return, especially shares. This model helps in evaluating whether an asset or investment provides sufficient returns commensurate with its risk. In this study. We used weekly stock price data and composite stock prices from Yahoo Finance and BI interest rates taken from Bank Indonesia from January 2020 to December 2023. The research findings found that there were 6 out of 12 samples forming the optimal portfolio, namely ITMG (28.0%), ADRO (16.6%), BMRI (29.2%), BBNI (13.7%), BBCA (11.8%), and BBRI (0.6%) with a portfolio return of 0.41% and a portfolio risk level of 0.16%. The study emphasizes the importance of diversification for investors, particularly in volatile markets, to manage risks and enhance returns. It also highlights the strategic value of investing in high-dividend stocks for consistent income and portfolio stability, offering practical insights for optimizing investment strategies.

Keywords

Capital Asset Pricing Model (CAPM); Investment; Optimal Portfolio.

Full Text:

DOWNLOAD [PDF]

References

Abdal, A. M., Wynnie, I., Islami, A. U., & Safriadi, F. D. (2023). Estimation of Optimal Portfolio Return and Risk on the LQ-45 Index for the 2020-2022 Period Using the Capital Asset Pricing Model (CAPM). Jurnal Matematika, Statistika Dan Komputasi, 19(3), 506–519. https://doi.org/10.20956/j.v19i3.25005

Afego, P. N. (2017). Effects of changes in stock index compositions: A literature survey. International Review of Financial Analysis, 52, 228–239. https://doi.org/10.1016/j.irfa.2017.06.004

Agouram, J., Anoualigh, J., & Lakhnati, G. (2020). Capital Asset Pricing Model (CAPM) Study in Mean-Gini Model. International Journal of Applied Economics, Finance and Accounting, 6(2), 57–63. https://doi.org/10.33094/8.2017.2020.62.57.63

Almeida, R. L. de, & Neves, R. F. (2022). Stock market prediction and portfolio composition using a hybrid approach combined with self-adaptive evolutionary algorithm. Expert Systems with Applications, 204, 117478. https://doi.org/10.1016/j.eswa.2022.117478

Apriyanti, V., & Supandi, E. D. (2019). Perbandingan Model Capital Asset Pricing Model (Capm) Dan Liquidity Adjusted Capital Asset Pricing Model (Lcapm) Dalam Pembentukan Portofolio Optimal Saham Syariah. Media Statistika, 12(1), 86. https://doi.org/10.14710/medstat.12.1.86-99

Astuti, A., Sulistianingsih, E., Martha, S., & Andani, W. (2024). The Application of Delta Gamma Normal Value at Risk to Measure the Risk in the Call Option of Stock. JTAM (Jurnal Teori Dan Aplikasi Matematika), 8(2), 324–335. https://doi.org/10.31764/jtam.v8i2.19669

Atmaningrum, S., Kanto, D. S., & Kisman, Z. (2021). Investment Decisions: The Results of Knowledge, Income, and Self-Control. Journal of Economics and Business, 4(1), 100–112. https://doi.org/10.31014/aior.1992.04.01.324

Audi, M., Ali, A., & Al-Masri, R. (2022). Determinants of Advancement in Information Communication Technologies and its Prospect under the role of Aggregate and Disaggregate Globalization. Scientific Annals of Economics and Business, 69(2), 191–215. https://doi.org/10.47743/saeb-2022-0009

Bank Indonesia. (n.d.). BI Rate. Retrieved January 8, 2024, from https://www.bi.go.id/id/statistik/%0Aindikator/BI-Rate.aspx

Bursa Efek Indonesia. (n.d.). Indeks Saham. Retrieved January 8, 2024, from https://www.idx.co.id/id/data-pasar/data-saham/indeks-saham/

Chattopadhyay, D., Banerjee, S., & Srivastaw, S. K. (2022). Performance of Optimum Sharp Portfolio and CAPM Portfolio for Sustainability of Small Investors. Asia Pacific Journal of Management and Technology, 02(04), 07–16. https://doi.org/10.46977/apjmt.2022v02i04.002

Chou, R. K., Wang, Y.-C., & Jimmy Yang, J. (2021). Share pledging, payout policy, and the value of cash holdings. Journal of Empirical Finance, 61, 18–33. https://doi.org/10.1016/j.jempfin.2020.12.004

Farida, Y., Purwanti, I., & Ulinnuha, N. (2022). Comparing Gaussian and Epanechnikov Kernel Of Nonparametric Regression In Forecasting Issi (Indonesia Sharia Stock Index). BAREKENG: Jurnal Ilmu Matematika Dan Terapan, 16(1), 323–332. https://doi.org/10.30598/barekengvol16iss1pp321-330

Han, X., Li, K., & Li, Y. (2018). Investor Overconfidence and the Security Market Line: New Evidence from China. SSRN Electronic Journal, 12(1), 1–60. https://doi.org/10.2139/ssrn.3284886

Hundal, S., Eskola, A., & Tuan, D. (2019). Risk–return relationship in the Finnish stock market in the light of Capital Asset Pricing Model (CAPM). Journal of Transnational Management, 24(4), 305–322. https://doi.org/10.1080/15475778.2019.1641394

Huy, D. T. N., Loan, B. T. T., & Anh, P. T. (2020). Impact of selected factors on stock price: a case study of Vietcombank in Vietnam. Entrepreneurship and Sustainability Issues, 7(4), 2715–2730. https://doi.org/10.9770/jesi.2020.7.4(10)

Koumou, G. B. (2020). Diversification and portfolio theory: a review. Financial Markets and Portfolio Management, 34(3), 267–312. https://doi.org/10.1007/s11408-020-00352-6

Latunde, T., Shina Akinola, L., & Deborah Dare, D. (2020). Analysis Of Capital Asset Pricing Model On Deutsche Bank Energy Commodity. Green Finance, 2(1), 20–34. https://doi.org/10.3934/GF.2020002

Markowski, L. (2020). Further evidence on the validity of CAPM: The Warsaw Stock Exchange application. Journal of Economics and Management, 39, 82–104. https://doi.org/10.22367/jem.2020.39.05

Mumu, S. (2020). Portfolio Optimization Using The Capital Asset Pricing Model (CAPM) At The Idx-30 Index Company On The Indonesia Stock Exchange (IDX). International Journal of Management IT and Engineering, 10(11), 50–57. https://www.indianjournals.com/ijor.aspx?target=ijor:ijmie&volume=10&issue=11&article=004

Nurhayati, I., Endri, E., Suharti, T., Shinta Aminda, R., & Muniroh, L. (2021). The Impact Of COVID-19 On Formation and Evaluation Of Portfolio Performance: A Case Of Indonesia. Investment Management and Financial Innovations, 18(3), 63–73. https://doi.org/10.21511/imfi.18(3).2021.06

Pasaribu, D. B., Maruddani, D. A. I., & Sugito, S. (2018). Pengukuran Kinerja Portofolio Optimal Capital Asset Pricing Model (Capm) Dan Arbitrage Pricing Theory (Apt) (Studi Kasus: Saham-Saham LQ45). Jurnal Gaussian, 7(4), 419–430. https://doi.org/10.14710/j.gauss.v7i4.28870

Prasad, S., Kiran, R., & Sharma, R. K. (2021). Influence Of Financial Literacy On Retail Investors’ Decisions In Relation To Return, Risk And Market Analysis. International Journal of Finance & Economics, 26(2), 2548–2559. https://doi.org/10.1002/ijfe.1920

Rutkowska-Ziarko, A., Markowski, L., Pyke, C., & Amin, S. (2022). Conventional and downside CAPM: The case of London stock exchange. Global Finance Journal, 54, 100759. https://doi.org/10.1016/j.gfj.2022.100759

Sarva Jayana, N., & Pardomuan Sihombing. (2020). Optimal Portfolio Analysis Of Idx-30 And Lq-45 Portfolio With The Capm Method Of The Indonesia Stock Exchange. Dinasti International Journal of Digital Business Management, 1(2), 132–141. https://doi.org/10.31933/dijdbm.v1i2.128

Sembiring, F. M. (2022). How Well is the Implementation of CAPM in Condition of Market Anomaly? Case in Market Overreaction Anomaly at Indonesia Stock Exchange. INFLUENCE: International Journal of Science Review, 4(1), 166–178. https://doi.org/10.54783/influencejournal.v4i1.14

Setyo, T. A., & Kurniasih, A. (2020). The Optimal Portfolio of JII Shares Listed on the Indonesian Stock Exchange: The Single Index Model Approach. European Journal of Business and Management Research, 5(6), 1–7. https://doi.org/10.24018/ejbmr.2020.5.6.629

Sholehah, N. A., Permadhy, Y. T., & Yetty, F. (2020). The Comparison of Optimal Portfolio Formation Analysis with Single Index Model and Capital Asset Pricing Model in Making Investment Decision. European Journal of Business and Management Research, 5(4), 1–9. https://doi.org/10.24018/ejbmr.2020.5.4.470

Vergara-Fernández, M., Heilmann, C., & Szymanowska, M. (2023). Describing Model Relations: The Case Of The Capital Asset Pricing Model (CAPM) Family in Financial Economics. Studies in History and Philosophy of Science, 97, 91–100. https://doi.org/10.1016/j.shpsa.2022.12.002

Yahoo Finance. (n.d.). Harga Saham. Retrieved January 8, 2024, from https://finance.yahoo.com/

DOI: https://doi.org/10.31764/jtam.v9i1.27799