EXECUTIVE SUMMARY

I. OBJECTIVE
Treasury Manager has to make a mutual fund equity portfolio. The portofolio per unit
is set IDR 1,000,000,000 wich should be consisted of PT. Tambang Batubara Bukit
Asam Tbk. (PTBA), PT. Express Transindo Utama Tbk. (TAXI), and PT. Wijaya
Karya (Persero) Tbk. (WIKA). Calculation should use data from 1 January 2012 26
September 2014 which using daily data.
I have to invest for each stock that will not exceed limit budget Rp.1,000,000,000.
In table 1.1 included assets Allocation of Portfolio
Picture 1.1
Assets Allocations


Number of lots should be invested
PTBA, 130 lots or 13000 shares
TAXI, 3034 lots or 303400 shares
WIKA, 1531 lots or 153100 shares

Table 1.1
Return Portofolio
Stock Weights Expected Portofolio Return
PTBA 17.16%
0.1431%

TAXI 42.02%
WIKA 40.82%
Total Weights 100.00%
Expected Return Portfolio is 0.1431% per day or 52.22% per year.

Table 1.2
Risk Portfolio
Portofolio Analysis Daily Annualised
Expected Return (%) 0.14% 52.22%
Total Expected Return Rp1,428,533 Rp521,414,4
74.30
Variance 0.00212399
Standard Deviation (%) 4.61%
Ind. Gov. Bond 10Y Return 0.02% 8.21%
Sharpe (Reward-to-Volatility) Measure 0.03104249
Investors's Risk Aversion 1.34713117
5% Value at Risk (VaR) -0.21%

Risk of Portfolio is
Variance = 0.00212399
Standard deviation = 4.61%
Value at Risk = -0.21%


Table 1.3
Performance Measurement Monthly
Average
Return
Standard
Deviation
Variance Beta
Coefficient
Sharpe
Ratio
Treynor
Ratio
Jensen
Alpha
IHSG (Daily) 0.0455% 1.15% 0.000132 1.000000000 2.00% 0.02% 0.00%
PTBA 0.0329% 2.72% 0.000739 0.42958354 0.38% 0.02% 0.00%
TAXI 0.2203% 3.19% 0.001019 1.13462953 6.20% 0.17% 0.17%
WIKA 0.1649% 3.13% 0.000977 0.65740154 4.56% 0.22% 0.13%
Indonesia Gov
Bond
0.0225%
Portfolio 0.1431% 4.61% 0.002124 - 2.62% - -


II. ANALYSIS
There are a few steps to measure the optimal portfolio, based on return and risk.
1. Determine stock that want to invested (each stock is given in instruction)
a. PTBA
b. TAXI
c. WIKA
Because TAXI was IPO in November 6, 2012, PTBA and WIKA didnt
calculated from January 1, 2012. PTBA and WIKA calculated from
November 6 2012,same with TAXI.
2. Calculated Average Return and Standard Deviation
a. First, calculate HPR. Because of IPO TAXI in November 6, 2012, data
use daily, not weekly or monthly.
b. Then calculate the Covariance using feature data analysis in Microsoft
Excel 2010, so beta can be calculated by divide covariance of IHSG
and stock. As shown below


c. Calculate the performance of Portfolio. There are several method to
calculate portfolio performance, Sharpe ratio, Jensen Ratio and
Treynor ratio.
Sharpe ratio
The Sharpe ratio tells us whether a portfolio's returns are due to
smart investment decisions or a result of excess risk.

Treynor Ratio
Treynor ratio is a risk-adjusted measure of return based on
systematic risk
IHSG PTBA TAXI WIKA
IHSG 0.00013221
PTBA 5.67951E-05 0.000738218
TAXI 0.000150009 3.67061E-05 0.001016494
WIKA 8.69148E-05 0.000124314 5.64547E-05 0.000977375
*Calculation of covariance using data analysis
IHSG PTBA TAXI WIKA
IHSG 1
PTBA 0.181796987 1
TAXI 0.409197712 0.042373471 1
WIKA 0.241786193 0.14635125 0.056639241 1
*Calculation of correlation using data analysis
PTBA 0.429583537
TAXI 1.134629534
WIKA 0.65740154
Covariance
Beta

Jensen
Jensen measure the average return on a portfolio based on beta
and capital asset pricing model

Average
Return
Standard
Deviation
Variance Beta
Coefficient
Sharpe
Ratio
Treynor
Ratio
Jensen
Alpha
IHSG (Daily) 0.0455% 1.15% 0.000132 1.000000000 2.00% 0.02% 0.00%
PTBA 0.0329% 2.72% 0.000739 0.42958354 0.38% 0.02% 0.00%
TAXI 0.2203% 3.19% 0.001019 1.13462953 6.20% 0.17% 0.17%
WIKA 0.1649% 3.13% 0.000977 0.65740154 4.56% 0.22% 0.13%
Indonesia Gov
Bond
0.0225%
Portfolio 0.1431% 4.61% 0.002124 - 2.62% - -
After calculate ratio, we can analyse that TAXI have greatest ratio than
other stock in sharpe ratio and Jensen Alpha. But WIKA have higher
value in Treynor Ratio
d. Define the best wieght each stock
First, we must make bordered variance matrix, as shown below

Then use feature solver in microsoft excel 2010. There are several
constraints :
Total weight is 1
Each of weight of stock is more than 0
Use Sharpe Ratio as objective to maximize
Then calculate markowitz risk Minimization using solver with several
constraint
Use variance as objective to minimize
Total weight is 1
Each weight of stock more than 0
Sharpe ratio of markowitz and first calculation must equal
With these following step, we can receive a result of weight of each
stock

3. Calculate Net Assets Value
Bordered Variance 0.17157347 0.420212 0.408215
Covariance Matrix PTBA TAXI WIKA
0.171573 PTBA 0.00354814 -0.00053 -0.00057
0.420212 TAXI -0.0005315 0.005273 0.001991
0.408215 WIKA -0.0005657 0.001991 0.003368
2.6512E-05 0.001234 0.000863
0.00143065
0.00212399
0.04608681
0.03104249
Variance
Average Return
Standard Deviation
Sharpe Ratio
Value of each share in portfolio called net assets value. We can calculate net
assets value equal to assets minus liabilities and divided by number of shares

Net Assets value of portfolio is 2126 with expected return of year is 52.22%
which define in next step
4. Calculate portfolio performance

After we calculate portfolio, we can conclude that portfolio have expected
return as 52.22% per year or 0.14% per day. It means more bigger than
indonesian Government Bond as 8.21% per year or IHSG as 17% per year.
Variance of portfolio is 0.00212399, lower than other stock. It means that
portfolio is more better in risk.

III. CONCLUSION AND RECOMENDATION
3.1 Conclusion
Treasury Manager must buy PTBA, 130 lots or 13000 shares, TAXI, 3034 lots
or 303400 shares, WIKA, 1531 lots or 153100 shares.
Investment Rp1,000,000,000
Stock
Assets
Allocation
Investment
Allocation
Share
Price*
Number
of Shares
Number
of Lots**
Amount
PTBA 17.16% 171573474.9 13100 13097 130 Rp170,300,000
TAXI 42.02% 420211617.9 1385 303401 3034 Rp420,209,000
WIKA 40.82% 408214907.3 2665 153176 1531 Rp408,011,500
Total 100.00% 469674
*Share price based on adjusted close 26 September 2014
**Number of Lot is 100
2126
3236
4926
7498
11414
17374
Rp998,520,500
5th Year
4th Year
3rd Year
2nd Year
1st Year
Net Assets Value
Portofolio Analysis Daily Annualised
Expected Return (%) 0.14% 52.22%
Total Expected Return Rp1,428,533 Rp521,414,474.30
Variance 0.00212399
Standard Deviation (%) 4.61%
Ind. Gov. Bond 10Y Return 0.02% 8.21%
Sharpe (Reward-to-Volatility) Measure 0.03104249
Investors's Risk Aversion 1.34713117
5% Value at Risk (VaR) -0.21%
Return is 52.22% per year or 0.14 per day and total amount of stock is
Rp.998,520,500.00

3.2 Recomendation
PTBA is gain a lower return in portfolio. We should change to better stock to give
more better performance of portfolio.

References


http://finance.yahoo.com/ accessed in September 29, 2014
http://www.investopedia.com/terms/t/treynorratio.asp accessed in September 29, 2014
http://www.investopedia.com/terms/j/jensensmeasure.asp accessed in September 29, 2014
http://www.investopedia.com/terms/s/sharperatio.asp accessed in September 29, 2014