Mean-Variance Optimal Portfolio Selection with Risk Aversion on Transportation and Logistics Sector Stocks Based on Multi-Criteria Decision-Making

Aulya Putri; Riaman Riaman; Sukono Sukono

doi:10.46336/ijqrm.v6i1.895

Mean-Variance Optimal Portfolio Selection with Risk Aversion on Transportation and Logistics Sector Stocks Based on Multi-Criteria Decision-Making

Aulya Putri, Riaman Riaman, Sukono Sukono

Abstract

The importance of the transportation and logistics sector to a country's economy, coupled with the growth of this sector in Indonesia, requires investment support for this sector to continue to grow. Therefore, stocks in the transportation and logistics sector are attractive for investment portfolio consideration. The optimal portfolio selection is to minimize the risk with the expected return. In the formation of an investment portfolio, the problem is how to determine the weight of capital allocation in order to get the maximum return while still considering the risk in each stock, by considering several criteria in decision making. This study was conducted to determine the best stock selection in the transportation and logistics sector listed on the Indonesia Stock Exchange, and determine the optimal weight in the investment portfolio. The method used is Multi-Criteria Decision Making (MCDM), namely Technique for Order Preference by Similarity to Ideal Solution (TOPSIS) using 15 financial metrics as relevant criteria in stock selection. Furthermore, to determine the allocation weight to form an optimal stock portfolio using the Mean-Variance model with Risk Aversion. The stocks analyzed were 28 stocks in the transportation and logistics sector. The results of research based on MCDM selected 9 stocks, namely MITI, BIRD, HATM, TMAS, JAYA, PPGL, BPTR, ASSA, and RCCC. However, TMAS, PPGL, and BPTR stocks are not included in portfolio formation because they have a negative average return. Based on the optimization results, the allocation weights of the 6 stocks included in the optimal portfolio are BIRD (37.7%), JAYA (24.6%), MITI (12.9%), HATM (9.9%), ASSA (7.5%), and RCCC (7.4%). The results of this study are expected to be a consideration in making investment decisions.

Keywords

MCDM; TOPSIS; Stocks; Mean-Variance Risk Aversion; Optimal Portfolio

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DOI: https://doi.org/10.46336/ijqrm.v6i1.895