Construction Of Optimal Portfolio Using Single Index Model And Constant Correlation Model For Kompas 100 Index Over The Period 2014 – 2018

Abstract

Abstract: The purpose of this research is to test which method is better used for optimal portfolios, namely the single index model or constant correlation to help investors make investments. The sample consisted of 46 companies that have consistently joined in Kompas 100 in the period February 2014 to July 2018. After optimizing the portfolio, both methods were tested using the risk-adjusted method, namely Sharpe, Treynor, and Jensen Index. By using the single index model, 11 companies are included in the optimal portfolio of 46 samples. While using the constant correlation model there are 9 companies that enter into an optimal portfolio of 46 samples. After conducting the risk-adjusted method the best method is to use a single index model because it provides the best performance between the two portfolios.
Keywords: Optimal Portfolio, Single Index Model, Constant Correlation Model, Indonesia Stock Exchange, and Kompas 100