Optimization of the Mean-Absolute Deviation Portfolio Investment in Some Mining Stocks Using the Singular Covariance Matrix Method
Kalfin (a*), Sukono (b), Ema Carnia (b)
a) Master Program in Mathematics, Faculty of Mathematics and Natural Sciences, Universitas Padjadjaran, Jl. Raya Bandung-Sumedang Km 21, Jatinangor 45363, Sumedang. West Java, INDONESIA
*kalfin17001[at]mail.unpad.ac.id
b) Department of Mathematics, Faculty of Mathematics and Natural Sciences, Universitas Padjadjaran, Jl. Raya Bandung-Sumedang Km 21, Jatinangor 45363, Sumedang. West Java, INDONESIA
Abstract
Investing in mining stocks, investors are often faced with risk problems. Usually to minimize risk, this is done by forming an investment portfolio. This paper aims to discuss the optimization of the investment portfolio. The data analyzed are several mining stocks traded on the capital market in Indonesia. Optimization is done by using the mean-absolute deviation model to determine the optimal weight. Where optimization is done using a singular covariance matrix. Based on the results of optimization, we can obtain a weight allocation composition that provides an optimal portfolio. In addition, we also predict the amount of return on expectations and risks in the optimal portfolio formed. So that the composition of this optimal weight can be used as a consideration for investors in investing their capital in several analyzed mining stocks.
Keywords: Mining stocks, return, portfolio, optimization, mean-absolute deviation
Topic: Applied Mathematics