Articles

Optimal Portfolio Construction Using Bitcoin, Gold, LQ45 Index, and Indonesia Bond Index

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Cryptocurrencies are significant improvements in the digital age that have changed the way we think about money. The first cryptocurrency was Bitcoin, introduced in 2009 and was created by Nakamoto. Due to their potential ups and downs, many people now think that cryptocurrencies are appropriate for use as an investment instrument, especially millennials who are attracted to higher-risk investment alternatives. A number of different investing options such as cryptocurrencies, gold, and other conventional assets like equities and bonds have unique characteristics and advantages. It’s essential for investors to understand the similarities and differences between cryptocurrencies and other assets in order to create diversified portfolios.

In this study, the optimum portfolio will be constructed using Bitcoin, Gold, LQ45 Index, and ABF IBI as the representative of Indonesia Bond Index. Mean-Variance Optimization will be used as an asset allocation method, and will be compared to the other methods such as Risk Parity, 60/40 Portfolio, and Equally Weighted to find a better risk-adjusted return. The Sharpe ratio analysis is used to evaluate the portfolio performance resulting from every method. The investment strategy will be simulated to know which strategy will result the best total return in the end of simulation period.

According to risk, return, and the Sharpe ratio, Bitcoin could perform better than gold, LQ45, and ABF IBI. Furthermore, the Mean-Variance Optimization resulted the highest Sharpe ratio compared to the other methods. The optimal weight from the portfolio construction using Mean-Variance Optimization allocated 53% to ABFI index, 40% to Bitcoin, and 7% to gold, which resulted 48.2% portfolio return, 40.44% portfolio risk, and 1077.8% Sharpe ratio. From the investment strategy simulation, the quarterly rebalancing strategy was found to be the best strategy with the total return 223.36%.

The Impact of Cryptocurrency on Global Trade and Commerce

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This study aimed to investigate the impact of cryptocurrency on global trade and commerce. The research objectives included examining the extent to which the adoption of cryptocurrency has disrupted traditional financial systems and affected cross-border transactions, as well as investigating the potential benefits and challenges of using cryptocurrency for global trade and commerce. A mixed-methods research design was used, incorporating both quantitative and qualitative data collection and analysis techniques. The study involved an extensive literature review, a survey of businesses involved in international trade, and interviews with key stakeholders. The results showed that cryptocurrency offers benefits such as reduced transaction costs, faster settlement times, and increased transparency in transactions. However, there are also challenges such as regulatory and legal hurdles, security concerns, and limited understanding of cryptocurrency. The study also highlights the factors that influence the adoption of cryptocurrency in international trade, including regulatory and legal frameworks, security concerns, awareness and understanding of cryptocurrency, transaction costs, and integration with existing systems. Finally, the attitudes and perceptions of businesses towards cryptocurrency are discussed, with the study showing that confidence in the reliability and security of cryptocurrency is a significant factor for adoption. Overall, the study provides insights into the potential opportunities and challenges presented by cryptocurrency in global trade and commerce, and the implications for policymakers, businesses, and investors.

A Study on Behavioural Bias & Investment Decision from Perspective of Indonesia’s Cryptocurrency Investors

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Cryptocurrency, an innovative asset class that is widely adopted by investors around the world. Indonesia is no exception to this, increasing the investor adoption up to 12 million investors in 2022. This number is very significant compared to Indonesia stock market investors that is only around 7 million investors. Various literatures have covered cryptocurrency in terms of pricing strategy and technicalities, so this paper extends the understanding of cryptocurrency dynamics from a behavioral finance perspective that is still less developed in Indonesia. This paper aims to explore the relationship between financial literacy, behavioral bias as well as its implication on the investment decision making process and investment performance from the perspective of investors based on Indonesia’s cryptocurrency investors at online communities. This paper used Structural Equation Modeling (SEM) to predict the relation between variables. Our results show that financial literacy has an impact on each behavioral bias. While the behavioral biases that investigate in this study have different result in term of impact on decision-making process and the investment performance. Overconfidence, herding and anchoring are the biases that significantly influence invertor’s decision making in scope of cryptocurrency market in Indonesia. This study outcome may help investors understand and increase the awareness of investor’s investment behavior and decision-making process, and parallel to that the regulators and other stakeholders may use the insight to improve investor’s protection.

Design and Evaluation of Robo-Advisors Using Index Fund and Alternative Assets of Cryptocurrency and Gold: Case of Indonesian Capital Market

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Robo-advisor is one of the most prominent innovation in the wealth management industry, and its success in Indonesia has been evident in the case of Bibit. Therefore, wealth management companies need to employ Robo-Advisor to overcome their competition. This research aims to give recommendation on asset allocation method and asset class selection for Robo-Advisors in Indonesia using Sharpe Ratio Analysis. Then, the author will analyze the robo-advisor’s performance during equity market downturn. Finally, The Robo-Advisor’s actual performance will be tested in 2018, 2019, and 2020. The Sharpe ratio analysis result showed that Robo-Advisors seeking higher risk-adjusted return should choose mean-variance optimization over risk parity for asset allocation method, and the inclusion of gold and bitcoin in a portfolio of stock mutual fund and bond mutual fund increases the risk-adjusted return of the portfolio. The proposed robo-advisor’s portfolio protected investors from equity market downturn in 2011-2010 in 83,3% of the case. Finally, the proposed robo-advisor’s portfolio generated better return for the conservative, moderate and aggressive investor during 2018, 2019, and 2020 when compared to LQ45.