Comparison of Optimal Portfolio Performance Using CAPM and Black-Litterman Model With Bayes Approach

Abstract

Background: The significant increase in Single Investor Identification (SID) in 2020 (56.21%) and 2021 (92.99%) indicates that the Indonesian capital market is increasingly in demand. At that time, when many stock indices fell, IDX BUMN20 increased and even managed to compete with IDX LQ4. Thus, there is an opportunity to maximize returns by forming a new portfolio.
Purpose: This study aims to analyze the optimal portfolio using the CAPM and–k the Litterman model with the Bayes approach.
Design/methodology/approach: The optimal portfolio is evaluated using financial ratios, forecasting tests, and back testing tests.
Findings/Result: The optimal portfolio results with the CAPM method consist of ANTM shares (26%), BBRI (50%), PTBA (11%), and TINS (13%). The optimal portfolio results using the Black-Litterman method with the Bayes approach consist of ANTM shares (18%), BBRI (60%), PTBA (17%), and TINS (6%).
Conclusion: Based on the evaluation results, Black-Litterman with the Bayes approach has a higher overall financial ratio value than CAPM.
Originality/value (State of the art): Overall, the application of the latest data of the optimal portfolio shows that the Black–Litterman method with the Bayes approach is more optimal than CAPM. However, the composition of the optimal Black - Litterman portfolio using the Bayes approach must be recomposed periodically.

Keywords:  bayes approach, Black – Litterman, CAPM, IDX BUMN20, optimal portfolio