Analysis of the formation of the Development of Investment Portfolio optimum optimal engaged in Retail Sector

Analysis of the formation of the Development of Investment Portfolio optimum optimal engaged in Retail Sector

CHAPTER I
INTRODUCTION

1.1 Background

Expressed as a set of portfolio assets held for certain economic purposes. The basic concept is expressed in the portfolio is how to allocate a certain amount of money on various types of investments that will yield optimal profits (Harold, 1998). The main consideration for fund owners (investors) in optimizing the investment decision is to maximize the return on investment (return) on risk (risk) any specific investment fund key consideration for owners (investors) in optimizing the investment decision is to maximize the return on investment (return) on risk (risk) any specific investment (Saragih et al., 2006). Portfolio analyze high rate of return with limited risk and minimizing the risk. The common shares will be analyzed to establish the optimal portfolio is retail trade sector stocks are included in the. Additionally Retail sector plays an important role in national economies that have the same strategic role as the heart pumps blood, giving retail jobs for the fresh graduated who is an early job when they finish their education. That is why researchers took "Analysis of the formation of the Development of Investment Portfolio optimum optimal engaged in Retail Sector".

Returns and risk having a very close relationship where the greater the expected rate of return, the greater the level of risk, so between return and risk are inseparable. Markowitz (1952) has shown that the risk of investing can be reduced by combining multiple assets into a portfolio. Markowitz method shows that if the financial assets in the portfolio have a correlation smaller return than a positive one, make a total portfolio risk can be reduced. Minimum risk would be achieved if the correlation is negative return correlation is perfect. Changes in the risk of a project or an investment depends on the risk or investment project individually, the contribution of the project or the investment risk for the company and the contribution of risk to the project or investment portfolio securities owned by the shareholders. Common stock risk can be divided into two, namely the systematic risk (systematic risk) and unsystematic risk (unsystematic risk). Investment risks that can be avoided through diversification by establishing the optimal portfolio shares is unsystematic risk being systematic risk can not be avoided. In general, investors are risk averse. Risk Averse is that if the investor is faced with two investment options with the same expected rate of return and different risks, so he chose an investment with lower risk and if you have some efficient portfolio choice, the optimal portfolio is selected. Rates of return (expected return) and the level of risk (standard deviation) resulting from any portfolio formed. Selection of the optimal portfolio largely depends on the accuracy of the analysis investors in scrutinizing and analyzing the market. Blood for the retail sector is the economy into different sectors.
 
1.2 Problem Formulation

Issues that will be examined in this study are:

1. What is the average rate of return expected and the risk of individual securities?

1. What is the level of expected return and risk of the portfolio formed from each of these securities?

1. Investment portfolio composition of the fund with which one can establish efficient investment?
   
   1.3 Specific Objectives

1.3.1 For Researchers

For researchers expected results of this study can be used as a reference for further research, especially with regard to the optimal portfolio in investing in the development of the company's stock price in particular in the retail sector. Among others:

1. How to determine the average rate of profit and the expected risk of individual securities?
2. How to determine the level of expected return and risk of the portfolio formed from each of these securities?

3. To determine the composition of the investment portfolio of the fund which one can establish efficient investment?

1.4 Benefits of Research

The results of this research can be used as input in the formation of the optimal portfolio for an investment decision in the shares in the capital market in particular Retail sector.

CHAPTER 2

DISCUSSION

2.1 Basis Theory

Management is closely related to the investment portfolio. According to Reilly and Brown, investment is the commitment to set aside money (revenue) in the current period to compensate (1) akandatang needs in the future, (2) the rate of inflation, and (3) the uncertainty of acceptance in the future. Investors invest with the goal of obtaining a degree can compensate pengembelian three. Investment is an individual or a budgeting by entititas which has advantages and capital budgeting and expected from those who do will profit big in the future. The purpose of the establishment of a portfolio is a trade-off between expected returns and the level of risk that can be accepted by the investor. The basic model developed by Harry Markowitz's portfolio, the expected rate of return derived from a portfolio and risk level. Harry Markowitz (1952) has developed a basic model of modern portfolio theory is based on the problems associated with rational investor behavior. Markowitz uses fluctuations in profits as investment risk. A yield rate if the investment return s1% ± R and B generate investment return rate R ± s2% and if s1 <s2, then at the same level of benefits, namely R, B is deemed more risky investments. Therefore, investors will tend to choose investment A [2]. Of the basic model, then it is said that "a portfolio is categorized as an efficient portfolio (efficient portfolio) when the portfolio lies on the surface of an efficient (efficient frontier)". Efficient frontier is the curve that connects the efficient portfolio with the lowest standard deviation of the efficient portfolio that has Harry Markowitz (1952) has developed a basic model of modern portfolio theory is based on the problems associated with rational investor behavior.

Markowitz model assumptions:

1) There is no transaction fee

2) determined the optimum portfolio of minimum risk at a certain rate of return,
3) There is no risk-free deposits and loans as well as no short-selling

4) Portfolio optimum will lie on the efficient frontier curve starts from the most kecilMarkowitz risk of developing a portfolio theory, which looks at how investment returns can be optimized.

The research method used is quantitative and secondary methods. Of the consolidated stock price three-year period by taking the closing price of shares of each month. This research is comfirmation research that aims to explain the causal relationship between variables through hypothesis testing. Where the data / variable investigated first and then described relation is then formed his portfolio. Then perform inferential tests using the SPSS statistical tool of correlation coefficients after data is processed by method data taken Markowitz related to stock price sampled research, market capitalization, stock price index (CSPI), individual stock price index (IHSI) stock- stocks sampled in the study.

DATA COLLECTION AND SELECTION OF SAMPLES

This study uses data monthly closing stock price (price closed) during the period October 2011 - December 2011. The sample used in this study is a Retail company is Hero Supermarket Tbk Company. (HERO), Ace Hardware Indonesia Tbk. (ACES), which has been registered or Listing for three years in the Indonesia Stock Exchange and has the highest closing price in accordance with the period to be examined by the author.

2.2 PREVIOUS RESEARCH

According to a journal written Yayat Priyatna and F. Department of Mathematics Sukono ubuntu journal titled "Using Investment Portfolio Optimization Model Based on Markowitz that conformance testing using Chi-Square test, that the rate of return of each stock analyzed were normally distributed. Results of correlation analysis and taking into account the rate of return of each stock, two stocks finally HM. Sampurna and Telkom are being considered for inclusion in an investment portfolio. Optimal proportions are respectively 51% for HM. Sampurna and 49% for the Company that will provide the level of portfolio return and risk 2.9498619 0.25944706

According to a study by the journal of the Faculty of Social Eko Umanto University of Indonesia with the title of Portfolio Analysis and Performance Assessment Shares Optimal LQ-45 results Establishment of optimal portfolios using a single index model and the model of constant correlation will affect the returns and risks arising from the portfolio of the . The amount of stock portfolio returns formed by each model is affected by (1) the proportion of funds (budget allocation), (2) strategic asset allocation (3) the risk factors set forth in beta stocks. Formed using a single index model. Forming optimal portfolios, investors should consider a few other factors beyond the stock price factors, LQ-45 Index, and the level of interest rate Bank Indonesia (SBI). Other factors to be considered in the formation of the optimal portfolio is the macroeconomic factors and fundamental analysis of issuers.

According to a journal written by Dery Darusman Prasetiono Department of Management, Faculty of Economics and Business, University of Diponegoro ANALYSIS OF EFFECT OF FIRM SIZE, BOOK TO MARKET RATIO, PRICE EARNINGS RATIO, AND MOMENTUM TO RETURN PORTFOLIO SHARES multikolineralitas test in 2012 that showed the value of less than 10 for each variable. The test results showed heterokedastisitas random data distribution. Autocorrelation test results show the value of Durbin Watson 1.857, Portfolio shares of small companies with Firm Size earn lower returns than the stock portfolio of the company with Firm Size. Firm size shows a positive but not significant effect on the stock portfolio return. This is contrary to the results of research and Lantermans Kruger (2010) that the negative berpergaruh firm size on stock returns. According to a journal written by journal title analysis Rinayanti With Optimal Portfolio Formulation with Constant Corellation Model portfolio performance measurement results derived from stocks Jakarta Islamic Index compiled by Constant Corellation models did not differ significantly from the performance of Islamic equity funds studied performance measurement to incorporate elements of risk (risk adjusted return) by the method of Sharpe, Treynor and Jensen According to a journal written by Robert Pius Pardede by journal title OPTIMUM PORTFOLIO ANALYSIS OF STOCK BASED ON EXPECTED RETURN AND RISK Penalty Markowitz model CASE STUDY BASED ON THE TELECOMMUNICATIONS INDUSTRY. Based on the result that the data analysis using SPSS produces the expected return on the portfolio effect optimum, whereas the risk penalty no influence on the optimum portfolio. At each year of PT Indosat have the risk tolerance of 0.5 respectively. Risk lowest penalty held in 2003 semesters 1 and produce the highest utility in the 2nd half of 2004. Results of analysis using SPSS calculations produce no effect between expected return and risk penalty due to optimum portfolio expected return and risk penalty obtained results above 0.5. According to a journal written by Sari yuniarti of Merdeka University of Malang with the title of the journal "The establishment of optimal portfolio shares of banks using a single index model" that the optimal portfolio will contain assets that have a high value of the ratio of ERB.

According to a journal written by Novalina Taliawo and Dorcas Apriani Signs Atahau Alumni and Faculty of Economics lecturer-Satya Christian University with the title of the journal Discourse "BETA AND IMPLICATIONS OF DIVERSIFICATION OF SHARES IN JAKARTA STOCK EXCHANGE" in 2007 the result that the beta and unsystematic risk of having a relationship positive and significant, it can be seen from the product-moment correlation coefficient and Spearman. Portfolio formation results in this study are the stocks that have high beta, systematic risk is not too high. Both correlation coefficients (rs and rp) increases with the number of shares in the public portofolio.Secara research they mention the  j and Var (ej) is significant and positive.brelationship between  Of the 305 stocks in the sample was only 142 shares or 46.56% stake, which has a significant beta. Of 142 140 shares of stock is taken to be included in the portfolio as more combinations of portofolios that can be formed. Beta which is owned by 140 shares ranged between -0.3150 (DVLA) and 0.6679 (TLKM). Thus it can be seen that the shares are less responsive to changes in the market. According to a journal written by Yosi Syriac lecturer polytechnic Commerce majoring in administration of Padang with the title "Analysis ahem portfolio in order to optimize the return on investment in the Jakarta Stock Exchange". That result is the expected result (expeted return) and risk (standard deviation) of each individual investmentnya. At the individual level of investment risk is equal to 1.1451 teringgi happened BII occurred while the lowest shares in PT Asuransi Indonesia Airlines at 0.1740 so this illustrates that the investor can diversify by investing in shares the same risk when investors invest in one stock alone.

2.3 Discussion

2.3.1 Data and research variables

The data used are secondary data. In this study the variables that are used are as follows:

1. Return, is the expected rate of return of an investment.

2. Risk, is the risk level of an investment.

Analysis tools used in this study can be explained in the following steps:
Calculate the expected profit rate (Expected Return) of each company.

1) The formula used to find the expected rate of return on an investment is quoted from Warsini (2008:79), namely:

Rit = ( Pit + 1 – Pit ) / Pit

Description:
Rit = rate of return on stock i in period t.

Pit = price stock i in period t.

Pit + 1 = i's stock price at period-t + 1.

 

Then proceed to calculate the expected return is quoted from
Husnan (2005: 51) with the formula:

N                                                                    E ( Ri ) =          ∑         Rij                                                                                           i = 1                                                        N

 

Description:
E (Ri) = the average rate of return expected from the stock i.

Rij = rate of return of stock i at the j-th period.

N = Number of periods that occur.

2) Calculating the risk level of each company's shares

The formula used to find the level of risk each company cited
of Warsini (2008: 82), namely:

                    
Description:
E (Ri) = the average rate of return expected from the stock i.

Rij = rate of return of stock i at the j-th period.

N = Number of periods that occur.

Then proceed to calculate the variance and standard deviation of each
companies quoted on Husnan (2005: 53).

σ1 = √ σ1 ²

Specification :

σ1 = Variance

σ1 ² = Standard Deviation (Risk Level)

3) Correlation Coefficient

Coefficient is used to determine the relationship between the variables X and Y.

ρ =                               n ∑ XY - ∑ X ∑ Y               √{ [ n ∑ X² - ( ∑ X )² ] [ n ∑ Y² - ( ∑ Y )² ] }

 

4) Determine the Proportion of Investment

In this study the authors determined the proportion of investment funds with a random method.

5) Expected Return

Portofolio profit rate is computed using the Markowitz

N                                                           E ( Rp ) =         ∑ Xi . E ( Ri )                                                                               i=1

 

Description:
E (Rp) = Expected rate of return on the portfolio.

Xi = proportion of funds invested in stocks i.

E (Ri) = Expected rate of return on stock i.

6) Standard Deviation

σp²       = X1² σ1² + X2² σ2² + X3²σ3² + X4² σ4² + X5² σ5² + 2 ( X1 X2 ρ12 σ1 σ2 + 2 ( X1 X3 ρ13 σ1 σ3 ) + 2 ( X1 X4 ρ14 σ1 σ4 ) + 2 ( X1 X5 ρ13 σ1 σ5 ) + 2 ( X2 X3 ρ23 σ2 σ3 ) + 2 ( X2 X4 ρ24 σ2 σ4 ) + 2 ( X2 X5 ρ25 σ2 σ5 ) + 2 ( X3 X4 ρ34 σ3 σ4 ) + 2 ( X3 X5 ρ35 σ3 σ5 ) + 2 ( X4 X5 ρ45 σ4 σ5 )

Then to calculate the variance and standard deviation of the portfolio using the formula:


And followed by:

σρ = √ σρ²

σρ ² = Variance potofolio

σρ = Standard Deviation (Risk Portfolio)

2.3.3 Results and Discussion

To determine statistical differences between stock returns and the risk of incoming candidates and candidates who do not fit the hypothesis testing portfolio. Portfolio risk is affected by the weighted average of each individual asset risk and the covariance between the assets that make up the portfolio. Return is one of the factors that motivate investors to invest and are rewarded for bravery menanggunnng investor risk investments. Correlation between risk and expected return is a relationship that is unidirectional and linear. Ie, the greater the risk of an asset, the greater the expected return of the asset, and vice versa. The following level of benefits and risks of securities HERO and ACES.

Rate Benefits and Risks of Each Rate Securities
Table 1
Average Gain levels and Risks of Each Sekruitas

Sekuritas

E ( Ri )

σ

Hero Supermarket Tbk. (HERO) ,

0.057985407

0.0045600

Ace Hardware Indonesia Tbk. (ACES)

0.0525967

0.0388897

Calculation of the expected profit rate of each company based on the closing price change (Closing Price) shares each month over a period of 1 year January - December 2012. Based on the calculation formula (1) Expected Return and (2) the level of risk of each firm will be obtained by the calculation as can be seen in Table 1. Where we can see the Hero Supermarket Tbk. (HERO) has the highest rate of return is 5.7%, while Ace Hardware Indonesia Tbk. (ACES) exists at low levels in the comparative advantage HERO is 5.3%. And the level of risk we can see Hero Supermarket Tbk. (HERO) has the lowest level of risk that is 0:45%, while Ace Hardware Indonesia Tbk. (ACES) has the greatest level ofrisk that is 3.8%.

Table 2
Expected Return and Standard Deviation Portfolio

Portofolio

The proportion of the investment portfolio

E (Rp)

σ

HERO

ACES

1

60

40

0.057985407

0.18

2

55

45

0.0425400

0.1775

Correlation Coefficient

When analyzed based on the investor's risk preferences, it can be concluded that for investors who like risk (risk lover) will choose portfolios to-1 as an efficient portfolio with the proportion of funds Hero Supermarket Tbk shares. (HERO) 60%, amounting to 5.79% expected return and risk by 18%. And for investors who do not like risk (risk averter) will select the portfolio into-2 as an efficient portfolio with the proportion of stock funds Ace Hardware Indonesia Tbk. (ACES) with 4.25% expected return and risk sebesar17, 75%.

 
CHAPTER III
CONCLUSION

CONCLUSION

1. During the period January 2012 - December 2012 Hero Supermarket Tbk. (HERO) is likely to produce a gain of 5.79% to the level of investment risk by 18%. Ace Hardware Indonesia Tbk. (ACES) is likely to result in a gain of 4.25% to the investment risk level of 17.75%.

2. Based on the two portfolios that have been established in this study, it can be concluded that:

• On the portfolio to-1 with the proportion of 60% shares of HERO, ACES 40% stake, has expected return of 5.79% and a risk level of 18%.

• In the 2nd portfolio by 55% the proportion of shares HERO, 45% ACES shares, 4.25% expected return and risk sebesar17, 75%.

3. When analyzed based on the investor's risk preferences, it can be concluded that for investors who like risk (risk lover) will choose portfolios to-1 as an efficient portfolio with the proportion of funds Hero Supermarket Tbk shares. (HERO) 60%, amounting to 5.79% expected return and risk by 18%. And for investors who do not like risk (risk averter) will select the portfolio into-2 as an efficient portfolio with the proportion of stock funds Ace Hardware Indonesia Tbk. (ACES) with 4.25% expected return and risk sebesar17, 75%.

 

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