Optimal Portfolio of Single Index Models on Jakarta Islamic Index Stocks 2022-2024

Abstract

Indonesia's sharia capital market has grown rapidly, yet many prospective investors still perceive stock investment as high-risk, complex, or inconsistent with Islamic principles, even though the Jakarta Islamic Index (JII) already provides a sharia-screened benchmark. This study determines the expected return, risk, and fund proportion of an optimal sharia-compliant portfolio formed with the Single Index Model (SIM) using JII constituents for January 2022 to December 2024. Employing a quantitative descriptive approach with purposive sampling, 16 stocks consistently listed in the JII throughout the period were analyzed through Excess Return to Beta (ERB) and Cut-Off Rate (Ci) calculations. Six stocks satisfied the ERB > Ci criterion (UNVR, CPIN, PGAS, BRPT, ADRO, and UNTR), but four produced negative fund-proportion weights (Wi), implying short selling, which is prohibited under DSN-MUI Fatwa No. 80/2011. The final sharia-compliant portfolio therefore consisted of only UNVR (67%) and CPIN (33%), yielding an expected return of -1% and a risk of 1%. These results, driven largely by bearish price movements in both constituents during the observation period, indicate that SIM outcomes are highly sensitive to prevailing market conditions and to sharia screening constraints, and are therefore more relevant as an academic illustration of portfolio construction than as a direct investment recommendation.