Critical Analysis of Sharpe, Treynor and Jensen Methods in Analyzing Stock Portfolio Performance LQ-45 Stock Studies

Abstract

The purpose of this study is to determine the stocks of the LQ-45 Index which form a portfolio based on a single index model, analyzed by Sharpe, Treynor, and Jensen methods, whether there are differences in the results of calculations and which is the most appropriate in measuring portfolio performance. The method used in this research is descriptive research with a quantitative approach and the data source used is secondary data from the Indonesia Stock Exchange. The population used is the LQ-45 Index shares for the period 2013-2018 and based on established criteria, a sample of 22 shares was obtained. Based on the methods of Sharpe, Treynor, and Jensen, the portfolio performance that is formed experiences a similar and fluctuating movement. Because the three methods produce almost the same value movement, the determination of slope (linear curve) requires accuracy. Therefore re-testing is done by using Robustness Test, namely by doing the Regression Test. With the magnitude of the value of b, it shows that the Sharpe method is most appropriate to be used in measuring portfolio performance in this study. Researchers suggest for further research, in the formation of portfolios can use other portfolio formation models. This research in the formation of LQ-45 stock portfolios using the single index model method, the portfolio formed is only one portfolio each year which causes less number of portfolios compared. In addition to the Sharpe, Treynor, and Jensen methods, researchers can then use other performance measurement methods for comparisons, such as M2 (Modigliani-Modigliani) and Information Ratio (RI).

Impact of COVID-19 on Performance Evaluation Large Market Capitalization Stocks and Open Innovation

“…The conventional method consists of benchmarks and style comparisons. The risk adjustment method is preferred over the conventional method [ 16 ]. This study will focus on performance analysis based on three approaches, namely Sharpe Index, Jensen’s Alpha, and Treynor, which will be explained as follows.…”

Evaluation of Equity Mutual Funds Portfolio Performance in Indonesia Using Sharpe, Treynor and Jensen Methods

“…Based on Qur'anitasari et al (2019), the Treynor method is a measurement of portfolio performance developed by Jack Treynor. This index is often referred to as the reward to volatility ratio.…”

“…The assumption used by Treynor is that the portfolio is well diversified so the risk that is considered relevant is systematic (Qur'anitasari et al, 2019).…”

“…According to Qur'anitasari et al (2019), the Jensen Method is an index that shows the difference between the actual rate of return obtained by the portfolio and the expected rate of return if the portfolio is on the capital market line. The Jensen index is the excess return above or below the security market line, it can be easily be defined as a measurement of how much a portfolio "beats the market" (Qur'anitasari et al, 2019).…”

Analisis Kinerja Portofolio Saham Menggunakan Metode Sharpe, Treynor dan Jensen

“…Gambar 1 .Perkembangan Return Indeks Saham LQ45 Sumber : yahoofinance.com (data diolah), 2023 Dari data di atas dapat dilihat return saham indeks mengalami fluktuasi return, pada tahun 2020 kedua indeks tersebut mengalami penurunan return dimana sama-sama memiliki return negative, selain itu pada tahun 2019 rata-rata return indeks LQ45 lebih besar dibandingkan rata-rata return IHSG, Tetapi pada tahun 2021 rata-rata return IHSG lebih besar dibandingkan rata-rata return LQ45, dan pada tahun 2022 terjadi pergerakan yang tidak searah antara return IHSG dan Indeks LQ45. Terdapat tiga metode yang digunakan dalam menentukan kinerja suatu portofolio yang dikembangkan oleh William Sharpe, Michael Jensen, dan Jack Treynor yang disebut dengan metode pengukuran kinerja portofolio metode sharpe, treynor, dan Jensen (Qur'anitasari et al, 2019). penelitian sebelumnya juga yang diteliti oleh (Susilowati et al, 2020) Tujuan penelitian ini adalah untuk mengetahui kinerja portofolio saham optimal pada kelompok saham indeks SRI-KEHATI di Bursa Efek Indonesia pada periode November 2018-Oktober 2019. hasil analisis penilaian kinerja portofolio saham menunjukkan bahwa Kinerja portofolio yang dinilai dengan menggunakan metode indeks Sharpe, Treynor, dan Jensen Semakin tinggi nilai suatu indeks, maka semakin baik pula kinerja portofolio sahamnya.…”