Comparison of The Markowitz and Single Index Model Based on M-V Criterion in Optimal Portfolio Formation

This research aim to compare the result of optimal portfolio formation between Markowitz and Single Index Models based on Mean-Variance criterion. The optimal portfolio with Markowitz Model is calculated by minimizing risk and determine the specific expected return level. Optimal portofolio calculation with Single Index Model results the proportion fund of each stock, thus it obtained the expected return and risk of the portfolio. The Comparison based on M-V criterion performed by determining the same expected return level portfolio of the Single Index Model, as a constraint on the Markowitz Model to minimize the risk. This research was applied to stocks in Jakarta Islamic Index (JII). At the same expected return rate of 1.2939% per week, Markowitz Model has a risk of % per week and the Single Index Model has a risk of 0.3318% per week. Based on the M-V Criterion, it can be concluded that the optimal portfolio formation with Markowitz Model is more dominant than the Single Index Model on Jakarta Islamic Index (JII) stocks in the period of December1^st, 2015-November 30^th, 2016.