Investment Portfolio Optimization Using Genetic Algorithm on Infrastructure Sector Stocks Based on the Single Index Model

Ayyinah Nur Bayyinah; Riaman Riaman; Sukono Sukono

doi:10.46336/ijqrm.v6i2.977

Investment Portfolio Optimization Using Genetic Algorithm on Infrastructure Sector Stocks Based on the Single Index Model

Ayyinah Nur Bayyinah, Riaman Riaman, Sukono Sukono

Abstract

Investment is a strategic step in managing assets to gain profits in the future by allocating some funds in the present. However, behind the promising potential returns, investment also contains risks that cannot be ignored. One way to reduce the level of risk in investing is to implement a portfolio diversification strategy, which is to form an optimal portfolio by allocating investments to various stocks. This study aims to identify the stocks that form the optimal portfolio, determine the optimal weight of each stock, and calculate the expected return and risk of the portfolio. The portfolio optimization process is carried out using Genetic Algorithm, with the calculation of expected return and risk using the Single Index Model (SIM) approach. The data used includes data on stocks in the infrastructure sector for the period July 1, 2023 to June 30, 2024. The results showed that there were six stocks selected in forming the optimal portfolio with the weight of each stock: PGEO 15.0023%, ISAT 32.1522%, GMFI 4.7822%, EXCL 15.3236%, JSMR 29.7379, and OASA 3.0018%. This optimal portfolio provides an expected return of 0.1167% with a portfolio risk of 0.0152%.

Keywords

investment, genetic algorithm, single index model, portfolio optimization

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DOI: https://doi.org/10.46336/ijqrm.v6i2.977