Establish efficient portofolio on LQ45 index using stochastic dominance

摘要

Investing on stock aims to get returns in the future. Stock as one of the risky investment need to be anticipated by selecting strong stock to form portofolio. Efficient portofolio can be established from dominant stocks on LQ45 Index. The purpose of this research is to apply SD method in forming efficient portofolio on LQ45 Index. The criteria used historical data on stock returns and showed which one dominates the other one. The monthly closing stock price of LQ45 Index were taken over the period of February 2016 until January 2020. The results show that there are 1 dominance in FSD, 84 dominance in SSD, and 41 dominance in TSD. The efficient portofolio obtained from ADRO, ASII, BBCA, BBNI, BBRI, BMRI, ICBP, INDF, KLBF, SMGR, TLKM, and UNTR. Furthermore, it can be concluded that the returns expectations of portofolio is 0.01196 and the risk level of portofolio is 0.0295.