Asih, Kiki Nindya; Achsani, Noe Azam; No ian i, Tan i; Manu ung, Adle Haymans
A icle
The ole o ESG-based asse s in gene a ing he dynamic
op imal po olio in Indonesia
Cogen Business & Managemen
P o ided in Coope a ion wi h:
Taylo & F ancis G oup
Sugges ed Ci a ion: Asih, Kiki Nindya; Achsani, Noe Azam; No ian i, Tan i; Manu ung, Adle
Haymans (2024) : The ole o ESG-based asse s in gene a ing he dynamic op imal po olio in
Indonesia, Cogen Business & Managemen , ISSN 2331-1975, Taylo & F ancis, Abingdon, Vol. 11,
Iss. 1, pp. 1-22,
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The ole o ESG-based asse s in gene a ing he
dynamic op imal po olio in Indonesia
Kiki Nindya Asih, Noe Azam Achsani, Tan i No ian i & Adle Haymans
Manu ung
To ci e his a icle: Kiki Nindya Asih, Noe Azam Achsani, Tan i No ian i & Adle
Haymans Manu ung (2024) The ole o ESG-based asse s in gene a ing he dynamic
op imal po olio in Indonesia, Cogen Business & Managemen , 11:1, 2382919, DOI:
10.1080/23311975.2024.2382919
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Banking & Finance | ReseaRch aR icle
Cogen Business & ManageMen
2024, VoL. 11, no. 1, 2382919
The ole o ESG-based asse s in gene a ing he dynamic op imal
po olio in Indonesia
kiki nindya asiha , noe azam achsania , an i no ian ia and
adle haymans Manu ungb
aschool o Business, iPB uni e si y, Bogo , indonesia; bBhayangka a uni e si y, Bekasi, indonesia
ABSTRACT
he aim o his s udy is o e alua e he ole o indonesia’s esg-based equi ies
( ep esen ed by e F sRi-keha i) in achie ing op imal po olio di e si ica ion wi h
di e en asse classes, i.e. con en ional asse s (equi ies and go e nmen bonds),
sa e-ha en asse s (gold), commodi ies (c ude oil) and digi al asse s (Bi coin). he da a
used in he s udy was he daily e u n o each asse om Janua y 2018 o Decembe
2023, ep esen ing da a om be o e, du ing and he eco e y a e he cOViD-19
pandemic. he me hodology consis s o a ou -s ep p ocess using he P uned exac
linea ime algo i hm, he Dcc-gaRch model and quad a ic p og amming op imiza ion.
he s udy implies ha in es men manage s and in es o s can educe in es men isk
and balance hei po olios by including esg-based asse s in hei po olios. he s udy
also u ges in es men manage s o mo e ac i ely manage hei po olios h ough
ebalancing s a egies. he esul s could also encou age policymake s o con inue o
suppo sus ainable inancing ini ia i es.
1. In oduc ion
in ecen decades, much esea ch has ocused on sus ainable and esg-based in es men s. his has been
d i en by a ious ac o s, i s ly he inc easingly e iden impac s o clima e change, coupled wi h an
inc eased ocus on en i onmen al e hics such as educing ca bon emissions, g een ene gy and g een
echnology, which has led o inc easing a en ion om a ious s akeholde s owa ds esg issues (Deloi e,
2020; ind ias u i & cha i i, 2021). One o he s akeholde s is he ins i u ional in es o s who a e aking
measu es o add sRi and esg in es men s o hei po olio ada , accele a ed by he cOViD-19 pan-
demic, which encou ages in es o s o do ‘ he igh hing’ (Mo elli & nes a, 2021). he capi al ma ke plays
an impo an ole in p o iding a a ie y o new in es men p oduc s ela ed o sus ainable esponsible
in es ing (sRi) and esg (Panagopoulos, 2023). esg-based in es men s a e expec ed o emain high in he
u u e and become a d i ing o ce o ma ke g ow h. PWc p edic s ha esg asse s unde managemen
will each $34 illion, o 21.5% o all global asse s, by 2026 (almuba ak e al., 2023). Meanwhile,
Bloombe g es ima es ha esg asse managemen could each mo e han $53 illion by 2025, accoun -
ing o a hi d o global asse managemen , while emaining domina ed by de eloped ma ke s
(Rumyan se a & a u ko, 2022).
cu en esea ch in sus ainable in es ing encompasses a a ie y o ocus a eas. his o ically, sha ma
e al. (2022) showed ha esea ch in he 1980s and 1990s was p edominan ly conce ned wi h hemes o
© 2024 he au ho (s). Published by in o ma uK Limi ed, ading as aylo & F ancis g oup
CONTACT Kiki nindya asih kikinindy[email p o ec ed].ac.id school o Business, iPB uni e si y, Padjaja an s ., Bogo , Wes Ja a, 16151,
indonesia.
h ps://doi.o g/10.1080/23311975.2024.2382919
his is an open access a icle dis ibu ed unde he e ms o he C ea i e Commons a ibu ion License (h p://c ea i ecommons.o g/licenses/by/4.0/), which
pe mi s un es ic ed use, dis ibu ion, and ep oduc ion in any medium, p o ided he o iginal wo k is p ope ly ci ed. he e ms on which his a icle has been
published allow he pos ing o he accep ed Manusc ip in a eposi o y by he au ho (s) o wi h hei consen .
ARTICLE HISTORY
Recei ed 26 no embe
2023
Re ised 14 May 2024
accep ed 16 July 2024
REVIEWING EDITOR
Da id McMillan,
Uni e si y o s i ling,
Uni ed kingdom o g ea
B i ain and no he n
i eland
KEYWORDS
cOViD-19; Dcc-gaRch;
dynamic po olio;
esg-based equi ies;
indonesia
JEL CLASSIFICATION
c22; g11; Q59
SUBJECTS
in es men & secu i ies;
en i onmen al economics;
econome ics; Finance
2 k. n. asih e al.
pe sonal alues such as ‘sac i ice’, ‘mo ali y’, and ‘ eligion’. Meanwhile, in he 2000s he ocus shi ed o
mo e empi ically o ien ed esea ch, ocusing on ‘ac i ism’, ‘sus ainabili y’, ‘s akeholde s’, and ‘ inancial pe -
o mance’. his s udy also showed ha speci ic hemes o sus ainable and esg-based in es men s accoun
o only 16 pe cen , while he es is la gely made up o socially esponsible/e hical in es men s and
esponsible/impac in es men s. his decade, esea ch on esg-based in es ing has ocused p ima ily on
pe o mance and compa ing i o adi ional in es ing.
Pede sen e al. (2021) p opose a heo y ha demons a es he po en ial cos s and bene i s o espon-
sible in es ing o econcile opposing iews on whe he esg p omo es o de ac s om pe o mance.
howe e , nume ous gaps emain. he con lic ing esul s and measu emen issues ega ding pe o mance
in empi ical a icles ha e been well documen ed by abhayawansa and Mooneeapen (2022). he gene al
conclusion om he empi ical li e a u e is ha he e is no s a is ical di e ence in isk-adjus ed pe o -
mance be ween esg and con en ional in es ing (e ag aguy & Re elli, 2015; F iede e al., 2015; humph ey
& lee, 2011). al hough mos o he empi ical li e a u e demons a es ha he e is no signi ican di e -
ence in e u ns, he e is a small bu pe sis en end sugges ing ha ac i ely managed esg po olios
can gene a e addi ional e u ns (spa kes & cow on, 2004).
Despi e a no iceable global shi owa ds sus ainable p ac ices, esea ch on esg in es ing in eme ging
ma ke s, pa icula ly in asia (wi h he excep ion o Japan, sou h ko ea, aiwan and singapo e), emains
s ikingly spa se, accoun ing o jus 5% o he li e a u e (sha ma e al., 2022). he e a e only e y limi ed
s udies o indonesia so a ; One o hem is he s udy by Robiyan o e al. (2023), which compa es esg-based
wi h con en ional in es men s and shows ha po olios ha ake esg in o accoun can educe in es men
isk. he cu en end owa ds sus ainable and esg-based in es men s as well as he limi ed s udies in asia
p o ide he undamen al basis o he impo ance o his esea ch, namely he di e si ying ole o esg
in es men s in dynamic po olio asse alloca ion and i s op imal pe o mance analysis.
he aim o his s udy is o comp ehensi ely shed ligh on he con ibu ion o indonesian esg-based
equi ies o op imal po olio di e si ica ion. B oadly speaking, di e si ica ion allows in es o s o educe
hei cumula i e isk by in eg a ing inancial asse s wi h ypically weak posi i e co ela ions. Possible
declines in one asse ca ego y may be somewha o se by upwa d mo emen s in o he s (Díaz e al.,
2022). his s udy also con ibu es o he exis ing li e a u e by p o iding a sys ema ic app oach o build-
ing a dynamic po olio, which consis s o combining indonesian esg-based asse s wi h o he di e en
asse classes, while aking in o accoun ac i e managemen o esg po olios in o de o achie e a
achie e op imal po olio pe o mance. hus, he p esen s udy ex ends he p e ious li e a u e by aising
wo gene al esea ch ques ions. Fi s , o wha ex en has esg in es ing in indonesia con ibu ed o op i-
mal po olio cons uc ion? second, does he pe o mance o di e en ypes o asse classes imp o e
when combined wi h local esg-based asse s?
o answe ou esea ch ques ions, we ely on daily da a om six exchange- aded unds (e Fs) ied o
a ious asse s om 2018 o 2023. he use o e Fs o e s se e al ad an ages, in line wi h Du a e al.
(2021) and B oads ock e al. (2021), while he ime ame o he s udy was chosen o cap u e he ins a-
bili y associa ed wi h he ou b eak o he cOViD-19 pandemic, we di ided he da a om 2018 o 2023
in o h ee ime windows, namely p e-cOViD-19, du ing cOViD-19, and eco e y. he e Fs in his s udy
co e mul iple asse classes. Fi s , equi ies and go e nmen bonds a e used as p oxies o adi ional
in es men s in he equi y and bond ma ke s, espec i ely. second, gold is used o ep esen asse s a-
di ionally conside ed sa e ha ens. hi dly, c ude oil is a con en ional commodi y asse s. Fou h, Bi coin
is conside ed a p oxy o new ends in digi al asse s. Fi h, in es men s in he indonesian equi y ma ke
ha add ess en i onmen al conce ns, i.e. esg-based e Fs, ep esen ed by he e F sus ainable and
Responsible in es men -keha i (sRi-keha i). he e F consis s o he sRi keha i equi y index, which uses
he p inciples o sus ainabili y, inance, good go e nance and en i onmen al conce ns as benchma ks.
he sRi-keha i equi y index was launched by he indonesian s ock exchange (iDX) in collabo a ion wi h
Yayasan keaneka agaman haya i indonesia (keha i, 2017; ku nia ama e al., 2021).
o achie e he aim o his s udy, ou me hodological app oach is o examine he dynamic co ela ion
o op imal po olios o al e na i e asse s unde conside a ion when esg-based e Fs a e included. Using
app op ia e echniques, we examine he abili y o his e F asse o di e si y and imp o e he pe o -
mance o a c oss-asse po olio o e ime. he dynamic me hod will help us o g asp he endency o
s ock luc ua ions and somehow be e simula e eal si ua ions acco ding o he capi al ma ke dynamics
cOgen BUsiness & ManageMen 3
(Oga a, 2012; Zinecke e al., 2016). We apply po olio ebalancing wi h di e en equencies based on
he minimum a iance op imiza ion me hod, which allows us o e alua e he po olios o bo h isk and
e u n du ing h ee cOViD window pe iods. o model he condi ional co-momen s be ween each pai o
asse e u ns, a Dcc-gaRch is used as i is p o en o be able o success ully es ima e he ime- a ying
co a iance ma ices (Filis e al., 2011) and is e y use ul o o mula ion a ious dynamic po olio ebal-
ancing scena ios (Díaz e al., 2022).
Va ious s udies on he o ma ion o c oss-asse po olios using a dynamic app oach ha e been ca ied
ou be o e using esg-based asse s in he indonesian capi al ma ke . hese s udies we e mainly con-
duc ed by Robiyan o e al. (2021), which speci ically examined he o ma ion o c oss-asse s po olio
be ween esg-based equi ies and gold, and Robiyan o e al. (2023), which expands on p e ious s udies
o include c yp ocu encies, gold, and bonds. howe e , o he bes o he au ho ’s knowledge, he e is
no esea ch on he pai ed po olios be ween esg-based e Fs ( ep esen ed by e F sRi-keha i) and he
indi idual o he asse s, namely blue-chip domes ic equi y e Fs, gold and c ude oil e Fs, easu y e Fs
and Bi coin e Fs. he pai ed po olio in es men s, which consis o only wo asse s, a e o en used in
ce ain s a egies such as hedging o pai ading. in hese s a egies, in es o s use he ela ionship
be ween wo speci ic asse s o mi iga e he isk o e u n o ela i e p ice mo emen s. a pai ed po olio
compa ed o a b oade c oss-asse po olio can p o ide a be e unde s anding o asse co ela ion and
is he e o e mo e ocused and sui able o speci ic ading o isk managemen objec i es. addi ionally,
his esea ch p o ides po olio ebalancing exe cises ha allow us o gain insigh in o whe he ac i ely
managing esg po olios p o ides be e pe o mance han passi e in es men in a single asse .
he s udy ound ha i s , om a isk pe spec i e, he ime- a ying ola ili ies o he indi idual asse
a e much highe han he pai ed asse ola ili ies o esg-based e Fs ( ep esen ed by e F sRi-keha i) and
any o he asse , indica es ha adding esg-based asse can di e si y and educe in es men isk. second,
om a pe o mance pe spec i e, he addi ion o esg-based asse s imp o es po olio pe o mance o
almos all asse classes used in his s udy, especially du ing he cOViD-19 pandemic, and sugges s hedg-
ing unc ions o esg-based asse s o main ain op imal pe o mance in he u bulen imes. hi d, he
dynamic pe o mance o each pai ed asse is consis en ega dless o ebalancing scena ios and window
imes, demons a ing he obus ness o he model. his s udy will con ibu e o he li e a u e on
c oss-asse po olios in e ms o he impo ance o dynamic po olio o mula ion and p o ide a be e
unde s anding o why in es o s suppo sus ainable inancing and why policymake s need o con inue
o acili a e and p omo e sus ainable inancing ini ia i es.
he ollowing sec ions o his s udy a e o ganized as ollows: he second sec ion p o ides an o e iew
o he li e a u e. he hi d sec ion desc ibes he da a and me hods used. he ou h sec ion p esen s he
esul s, ollowed by discussions in he i h sec ion. he inal sec ion p esen s conclusions om he o e -
all s udy.
2. Li e a u e e iew
Po olio heo y has unde gone signi ican de elopmen . his o ically, i s de elopmen can be aced om
adi ional po olio heo y ( P ) o pos mode n po olio heo y (PMP ), wi h mode n po olio heo y
(MP ) se ing as a c ucial miles one (leko ić, 2021). P ocuses on analyzing indi idual secu i ies wi h
a mo e subjec i e and non-sys ema ic app oach, making i less e icien a op imizing e u ns and isks.
MP , de eloped based on he pionee ing ideas o indi iduals such as Fama (1996) and hakansson (1975),
o e s a mo e analy ical and sys ema ic app oach. MP emphasizes he impo ance o di e si ica ion and
in e ac ion be ween asse s wi hin a po olio and aims o achie e he maximum expec ed e u n o any
gi en le el o isk ( isk-adjus ed e u n). his heo y iews he po olio as a holis ic en i y and no jus
a collec ion o indi idual secu i ies (she in & s a man, 2000).
a po olio includes a a ie y o asse ypes o inancial ins umen s ha a e used o di e si y isk by
di iding in es men s ac oss a numbe o ins umen s (sinchuko , 2022). a i s co e, di e si ica ion aims
o minimize isk in o de o achie e op imal e u ns (Pou babaee e al., 2016). asse alloca ion is abou
dis ibu ing in es men s ac oss di e en asse classes, such as equi ies, bonds, and commodi ies ha
make up he po olio (B esnan & gelb, 1999). asse alloca ion, a co ne s one o po olio managemen ,
na iga es he complex landscape o inancial ma ke s using a ious me hods (Manu ung, 2016). s a egic
4 k. n. asih e al.
asse alloca ion, based on a buy-and-hold philosophy, o mula es asse p opo ions based on long- e m
e u n expec a ions and isk ole ance, o en based on undamen al analysis, and pe iodically ebalances
hese ixed p opo ions (Di is e al., 2015). When ansi ioning o ac ical asse alloca ion, his app oach
p o ides lexibili y by allowing empo a y de ia ions om s a egic alloca ion o op imize e u ns by
exploi ing sho - e m ma ke oppo uni ies while emaining wi hin in es men guidelines (Fabe , 2017).
a he same ime, dynamic asse alloca ion, o en d i en by algo i hmic models, con inuously adap s o
ma ke ends and seeks o maximize he alue o posi i e ma ke changes and mi iga e nega i e impac s
h ough p ecise, imely asse ealloca ions, wi h he aim o imp o ing isk-adjus ed e u ns (chang e al.,
2017). Po olios cons uc ed using di e en asse alloca ion s a egies need o be ebalanced egula ly
o main ain hei desi ed a ge pe o mance (Boyan e e al., 2022).
a po olio’s expec ed e u n is calcula ed as a weigh ed a e age o each s ock’s expec ed e u n,
adjus ed o isk o luc ua ions. a no able ad an age o he MP app oach and i s de i a i es is hei
abili y o design a po olio wi h less isk han he o al isk o he indi idual secu i ies wi hin i , he eby
c ea ing an op imal po olio. Di e si ying he asse s in a po olio should a leas educe isk o inc ease
pe o mance. Risk-adjus ed e u n me ics a e ypically measu ed using eyno , sha pe, and alpha Jensen
me ics (Manu ung, 2016). acco ding o he heo y o isk-adjus ed e u ns, esg-based in es men s can
heo e ically educe isk by maximizing e u ns and hus ac as di e si ica ion in es men s (giese e al.,
2019). in eg a ing esg aspec s in o po olio managemen has a ac ed conside able a en ion due o i s
po en ial impac on e u ns and isk educ ion.
oday, he e a e only a limi ed numbe o s udies ha p o ide empi ical e idence on he di e si ying
p ope ies o esg-based asse s. a i e al. (2021) ha e unco e ed a weak dynamic link be ween g een
and con en ional s ock indices o e ime, implying di e si ica ion oppo uni ies o in es o s who p io i-
ize long- e m in es men ho izons, pa icula ly using da a om de eloped coun ies. hese esul s sup-
po bo h B ei ung and B ei ung and candelon (2006) and sha ma e al. (2022) con i med e idence o
bidi ec ional causali y be ween sus ainable and con en ional indices in he sho un, bu did no obse e
he same in he long un, wi h he econome ic analysis i mly based on da a om de eloped na ions.
in o he wo ds, Fe e e al. (2021) ha e shown ha s a egies combining clean ene gy s ock indices and
gene al s ocks o e no di e si ica ion o hedging bene i s, while clean ene gy s ock and g een bond
could o e in e es ing di e si ica ion p ospec s, all unde sco ed by da a om ad anced economies.
Mo eo e , Yousa e al. (2022) we e unable o iden i y obus empi ical e idence ac oss a ious quan-
iles, designed o eco d ex eme down u ns in he s&P 500, o alida e he sa e-ha en cha ac e is ic o
clean ene gy s ocks, e en when hey a e in eg a ed wi h posi ions in he s&P 500, unde sco ing he
u iliza ion o da a de i ed exclusi ely om de eloped coun ies. Meanwhile, Díaz e al. (2022) concluded
ha sRi-based asse s play a ole in di e si ying and imp o ing he inancial pe o mance o in es men
po olios wi h dynamic asse alloca ion s a egies and ce ain ebalancing scena ios, especially when
combined wi h di e en asse classes such as con en ional equi ies, go e nmen bonds, gold, c ude oil,
and Bi coin.
O e all, he li e a u e e iew showed ha he e is a pauci y o esea ch examining he con ibu ion o
esg in es men s in gene a ing dynamic, op imal in es men po olio di e si ica ion, especially du ing
he cOViD-19 pandemic in asian con ex s, pa icula ly in indonesia.
3. Da a and me hodology
3.1. Da a
he ull da a sample o each e F asse consis s o ime se ies da a wi h app oxima ely +/- 1300 obse -
a ions om Janua y 2018 o Decembe 2023. he da a was ob ained om ele an ma ke au ho i ies,
and i is a ailable on he Bloombe g and Re ini i eikon e minals, wi h all necessa y igh s and pe mis-
sions duly secu ed o i s use. he daily close p ice da a is i s ans o med in o log- e u ns using he
ollowing o mula:
X
X
=
−
252
1
*log (1)
cOgen BUsiness & ManageMen 5
whe e
ep esen s he annualized log- e u n o all analyzed a iables,
X
is he p ice index a pe iod , and
X
−
1
deno es he p ice index om one day be o e. Local e F da a was con e ed in o he same cu ency uni (us dolla ).
he de ailed da a used in he analysis a e a ailable in able 1.
an e F is a ype o mu ual und ha ades on exchanges, simila o a s ock, and is designed o ack
an index, commodi y, o compila ion o asse s, he eby p o iding b oad in es men exposu e, ypically
wi h lowe ees and be e liquidi y, hus enabling in es o s o pu chase o sell sha es h oughou he
ading day a ma ke p ices. in his s udy, bo h local and global e Fs a e used, i s , equi ies and easu y
bonds as a p oxy o con en ional in es men s in he equi y and ixed-income ma ke s i.e. blue-chip
equi y ep esen ed by e F lQ45 and bond e F (sPDR Bloombe g Ba clays in e na ional easu y Bonds
e F). second, gold (sPDR gold us e F) is used o ep esen asse s adi ionally conside ed sa e ha ens.
hi d, c ude oil (Uni ed s a es c ude Oil e F) ep esen s con en ional commodi y asse s. Fou h, Bi coin
(g ayscale Bi coin us e F) is conside ed a p oxy o new ends in digi al asse s which is bo h isky and
con empo a y (abdullah e al., 2022). Fi h, in es men in he local equi y ma ke ha include en i on-
men al conce ns, a e ep esen ed by he sRi-keha i e F.
3.2. Me hodology
a ou -s ep p ocess is p epa ed o de e mine he con ibu ion o esg in es men s in achie ing op imal
in es men po olio di e si ica ion, especially du ing he cOViD-19 pandemic in indonesia. Fi s , we es i-
ma e h ee cOViD-19 window pe iods using he P uned exac linea ime (Pel ) algo i hm. second, we
calcula e he a ious condi ional ola ili ies, he condi ional co a iance ma ix, and he condi ional co -
ela ions o he en i e sample pe iod using he Dcc-gaRch model. hi d, we es ima e he dynamic
po olio weigh s ha minimize he a iance o he espec i e po olios om each asse ype and he
esg asse using a quad a ic p og amming op imiza ion. Fou h, we measu e he po olio e u ns o
h ee cOViD-19 window pe iods using he sha pe a io. o inc ease obus ness, se e al ebalancing sce-
na ios a e conside ed.
3.2.1. Change poin s de ec ion
his esea ch uses h ee di e en ime pe iods: p e-cOViD-19, cOViD-19, and he eco e y pe iod o
cOViD-19. o dis inguish hese pe iods, we use he Pel algo i hm de eloped by killick e al. (2012). his
algo i hm e icien ly de ec s change poin s in he a iance o daily e u ns wi h a linea compu a ional
cos (see appendix a). Based on he de ec ion o hese change poin s, h ee ime windows we e de e -
mined. he p e-cOViD-19 pe iod ex ends om Janua y 1, 2018 o Feb ua y 26, 2020. he cOViD-19
pe iod begins on Feb ua y 27, 2020 and ends on Feb ua y 3, 2021. Meanwhile, he eco e y pe iod
begins on Feb ua y 4. 2021 o Decembe 31, 2023. see Figu e 1 o mo e de ails on selec ing hese
ime slo s.
3.2.2. Condi ional ola ili ies, condi ional co a iance ma ix, and condi ional co ela ions
he nex s ep is o calcula e he op imal asse alloca ion o pu oge he he po olio. One way o max-
imize e u ns while minimizing isk is h ough op imal asse alloca ion. his becomes inc easingly ele-
an as we conside sus ainable in es ing ends, such as po olios ocused on esg-based equi ies. o
add ess his complexi y, his esea ch u ilizes he Dcc-gaRch (Dynamic condi ional co ela ion
Table 1. Da a.
no e F icke asse class P oxy exposu e
1P emie e F sRi-KeHa i XisR.JK equi y esg equi y Local
2P emie e F LQ-45 R-LQ45X.JK equi y Bluechip equi y Local
3sPDR gold us gLD Commodi y gold Global
4uni ed s a es C ude oil e F uso Commodi y C ude oil Global
5sPDR Bloombe g Ba clays
in e na ional easu y Bond e F
BWX Bond go e nmen Bond Global
6g ayscale Bi coin us gB C C yp ocu ency Bi coin Global
his able epo s e F da a ac oss a ious asse classes, including equi ies, commodi ies, bonds, and bi coin. i de ails each e F’s name, icke
symbol, asse class, p oxy, and geog aphic exposu e. Da a sou ce: Bloombe g and Re ini i eikon.
6 k. n. asih e al.
gene alized au o eg essi e condi ional he e oscedas ici y) model and quad a ic p og amming o c ea e
a dynamic op imal po olio. Dcc-gaRch, as an ex ension o he gaRch model, enables mul i a ia e
analysis and is ex emely use ul in cap u ing co ela ed mo emen s be ween di e en ypes o asse s,
such as esg, wi h o he asse s like gold, c ude oil, o e en Bi coin. his model allows us o calcula e he
condi ional co a iance ma ix, which is a c ucial inpu in quad a ic p og amming o ob ain op imal asse
alloca ion. his model allows us o calcula e he condi ional co a iance ma ix, which is a c ucial inpu
in quad a ic p og amming o achie e op imal asse alloca ion. his is c ucial because he ideal asse
alloca ion con inually changes acco ding o ma ke dynamics cap u ed by he Dcc-gaRch model
(O skaug, 2009).
he basis o he o ma ion o he Dcc-gaRch model is gaRch i sel , and he gJR-gaRch model was
selec ed in his s udy. he gJR-gaRch model was de eloped by glos en e al. (1993). he gJR-gaRch
model is able o ake in o accoun asymme ic e ec s o le e age e ec s (si ua ions in which ola ili y
ends o be highe when asse p ices a e alling han when hey a e ising). he ollowing is he condi-
ional a iance model o gJR-gaRch:
σ ω αε βσ γ ε
j
q
j j
j
p
j j
j
q
j j
S
2
1
2
1
2
1
2
=++ +
=
−
=
−
=
−
−
−
∑∑∑
(2)
whe e
S j
−
−
is a dummy a iable ha akes he alue o 1 when ԑ −j is nega i e and 0 when ԑ −j is posi i e.
he model s a es ha posi i e ola ili y (ԑ > 0) and nega i e ola ili y (ԑ < 0) ha e di e en e ec s on
condi ional a iance. he le e age e ec is de ec ed in he model when γ is posi i e (ngunyi e al., 2019).
he speci ica ion o gJR-gaRch in his s udy is he s anda d gJR-gaRch (1,1), which p o ides compu a-
ional e iciency and ease o in e p e a ion while cap u ing he key ea u es o asse e u n dynamics
(Díaz e al., 2022).
he condi ional co a iance ma ix is calcula ed om he Dcc-gaRch model. engle (2002) and O skaug
(2009) s a e ha he Dcc-gaRch model is de i ed om he ollowing equa ions:
= +
µε
(3)
Figu e 1. Changepoin s on all asse s.
sou ce: au ho calcula ions.
his igu e p esen s he changepoin s o a iance on all e F asse s based on he PeL algo i hm. he de e mina ion o he esea ch ime
window is subjec i ely based on he esg and LQ45 asse s due o hei exhibi ing simila pa e ns o change.
cOgen BUsiness & ManageMen 7
whe e
ε
Hz
=1 2/
= n × 1 ma ix o e u ns om n a iables used
µ
= n × 1 ma ix o expec ed alues om
ε
= n × 1 ma ix o ime- a ying esiduals
H
= n × n ma ix o condi ional co a iance o
ε
z
= n × 1 ma ix o esiduals dis ibu ed no mally wi h a mean o ze o and cons an a iance
he equa ion
= +
µε
ep esen s he mean equa ion o he Dcc-gaRch model. he esidual con-
sis s o condi ional co a iance (H ) and esiduals wi h a ze o mean and cons an a iance (
z
).
condi ional co a iance is also illus a ed in he ollowing equa ion. his equa ion includes he condi-
ional s anda d de ia ion ( ola ili ies) and he condi ional co ela ion o s anda dized esiduals ha
change o e ime.
H DRD
whe e D
=
=
{}
=
diag i
i
σ
σ
σ
σ
,
,
,
,
1
2
00
0
0
00
⋯
⋱⋮
⋮ ⋱⋱
⋯
(4)
no e: h = n × n ma ix o condi ional co a iance a ime
D
= n × n ma ix o condi ional s anda d de i-
a ion a ime
R
= n × n ma ix o condi ional co ela ion a ime .
3.2.3. The dynamic op imal weigh o asse s
o ob ain he op imal asse alloca ion (dynamic op imal weigh s) wi h op imal e u ns a a ole able le el
o isk o he bes combina ion o he esg po olio wi h o he asse s, quad a ic p og amming can be
used. his is achie ed by minimizing po olio a iance (Díaz e al., 2022; Manu ung e al., 2021;
sahamkhadam e al., 2018).
min H
cons ain :
wP
i
n
i
ww
w
σ
2
1
1
()
=′
=
=
∑
(5)
whe e
H
ep esen s he condi ional co a iance ma ix o dimensions n × n and
w
is he ec o o dynamic
op imal po olio weigh s o e ime. he weigh s a e subjec o non-nega i i y cons ain s (
w
1,
w
2 …
wi
≥ 0). he op imal weigh s ob ained a e dynamic, ha is, hey a e op imal a ime due o he p esence
o a condi ional co a iance up o .
3.2.4. Po olio e u ns and pe o mance measu e
he pe o mance o each po olio combina ion o med is hen e alua ed using he sha pe Ra io, a me -
ic ha allows us o e alua e isk-adjus ed e u ns (sha pe, 1994):
SR
E
p
p
p
()
()
()
=
−
σ
(6)
whe e
E
p
()
and
σ
p
()
a e he mean and s anda d de ia ion o he po olio e u ns in he pe iod unde
conside a ion.
is he isk- ee in e es a e, which is ob ained om he Bi 7-day e e se epo a e
e ie ed om Bank indonesia (cen al bank) websi e.
his s udy also includes addi ional ansac ion scena ios o es he obus ness o he esea ch model.
he scena ios a e c ea ed whe eby an in es o changes he p opo ion o weigh o each asse in he
14 k. n. asih e al.
e u ns. When we combine esg-based equi ies wi h gold, we see an inc ease in isk-adjus ed e u n 3.1
pe cen age poin s highe han jus holding gold, and when we combine esg-based equi ies wi h go -
e nmen bonds, he isk-adjus ed e u n inc eases by 5.7 Pe cen age poin s highe han simply holding
gold go e nmen bonds. his poin s o he po en ial ole o esg-based equi ies in imp o ing he po -
olio pe o mance o he less isky asse s. in es ing in Bi coin gene a es he highes isk-adjus ed e u n
among indi idual asse classes, bu i s pe o mance de e io a es sligh ly when assembled as a po olio
o esg-based equi ies. in his po olio, esg-based equi ies s ill ha e a dominan weigh (mo e han 80%),
which means ha esg-based equi ies no only help o hedge and mi iga e he isks o in es ing in
Bi coin, bu also somewha p ese es i s pe o mance alue. in he case o oil, he indi idual in es men
p oduces a nega i e esul . howe e , when combined wi h esg-based equi ies, he po olio has a posi-
i e isk-adjus ed e u n, indica ing he abili y o esg-based equi ies o abso b isks a ising om he
inc eased unce ain y in he commodi y ma ke du ing he pandemic.
h oughou he eco e y pe iod, only gold and c ude oil in es men s gene a e a posi i e isk-adjus ed
e u n. howe e , when esg-based equi ies a e included in bo h gold and c ude oil, he e a e only mino
changes in he isk-adjus ed e u n. he combina ion o esg-based equi ies wi h lQ45 and esg-based
Figu e 7. Po olio weigh s 22-day ebalance scena io.
sou ce: au ho calcula ions.
his igu e p esen s he weigh e olu ion o minimum a iance po olios cons uc ed by combining he e Fs o each asse class and he e F
o esg-based equi ies o e he s udy pe iods o he 22-day ebalance unde cons ained po olios.
cOgen BUsiness & ManageMen 15
equi ies wi h go e nmen bonds pe o ms in nega i e e i o y. On he con a y, combining esg-based
equi ies wi h Bi coin imp o ed he isk-adjus ed e u n om nega i e o posi i e, he eby con i ming he
hedging unc ion o esg-based equi ies.
ables 7 and 8, espec i ely, show he esul s o scena ios o 5-day and 22-day ebalancing. he pe -
o mance o isk-adjus ed e u ns o indi idual asse s and in combina ion wi h esg-based equi ies p o-
duced ela i ely simila esul s compa ed o he 1-day ebalancing scena io. he consis ency o hese
esul s con i ms he obus ness o ou analysis. i is impo an o no e ha we do no ake ansac ion
cos s in o accoun when compa ing in es men isks in 1-, 5- and 22-day ebalancing scena ios. Unde
no mal ci cums ances, mo e equen ading may esul in highe ansac ion cos s.
Table 6. summa y o he 1-day po olio ebalancing scena io pe o mance.
P e-CoViD-19 CoViD −19 Reco e y
LQ45 esg + LQ45 LQ45 esg + LQ45 LQ45 esg + LQ45
Mean 0.080 0.074 0.034 −0.127 −0.003 0.013
s d.De 4.100 4.025 7.593 7.516 3.072 2.973
sha pe 0.016 0.058 0.002 −0.002 −0.006 −0.008
gold esg + gold gold esg + gold gold esg + gold
Mean 0.109 0.068 0.141 0.194 0.045 0.056
s d.De 1.845 1.635 3.530 3.212 2.455 2.237
sha pe 0.051 0.029 0.035 0.066 0.012 0.012
oil esg + oil oil esg + oil oil esg + oil
Mean −0.089 −0.036 −0.995 −0.293 0.241 0.114
s d.De 5.110 2.988 13.094 6.788 6.342 3.559
sha pe −0.021 −0.018 −0.077 0.011 0.035 0.028
Bond esg + Bond Bond esg + Bond Bond esg + Bond
Mean −0.001 −0.007 0.087 0.061 −0.115 −0.098
s d.De 0.886 0.875 2.072 2.180 1.796 1.719
sha pe −0.019 −0.017 0.034 0.091 −0.073 −0.098
Bi coin esg + Bi coin Bi coin esg + Bi coin Bi coin esg + Bi coin
Mean −0.461 −0.102 1.664 0.128 −0.040 0.090
s d.De 15.284 3.805 15.670 6.832 13.337 4.084
sha pe −0.031 −0.030 0.105 0.063 −0.004 0.019
sou ce: au ho calcula ions.
his able epo s on he summa y s a is ics o he obse ed e u ns (Mean), isk (s d.De ), and pe o mance measu e (sha pe) o he 1-day
ebalancing scena io assessmen on in es men o single asse : LQ45, gold, c ude oil, go e nmen bonds, and bi coin as compa ed o pai ed
asse s: esg-based equi ies and LQ45, esg-based equi ies and gold, esg-based equi ies and c ude oil, esg-based equi ies and go e nmen
bonds, and esg-based equi ies and bi coin.
Table 7. summa y o he 5-day po olio ebalancing scena io pe o mance.
P e-CoViD-19 CoViD −19 Reco e y
LQ45 esg + LQ45 LQ45 esg + LQ45 LQ45 esg + LQ45
Mean 0.080 0.076 0.034 −0.006 −0.003 0.001
s d.De 4.100 4.027 7.593 7.350 3.072 2.960
sha pe 0.016 0.065 0.002 0.018 −0.006 −0.009
gold esg + gold gold esg + gold gold esg + gold
Mean 0.109 0.078 0.141 0.203 0.045 0.053
s d.De 1.845 1.646 3.530 3.264 2.455 2.240
sha pe 0.051 0.034 0.035 0.071 0.012 0.011
oil esg + oil oil esg + oil oil esg + oil
Mean −0.089 −0.019 −0.995 −0.164 0.241 0.131
s d.De 5.110 3.020 13.094 6.922 6.342 3.646
sha pe −0.021 −0.014 −0.077 0.033 0.035 0.036
Bond esg + Bond Bond esg + Bond Bond esg + Bond
Mean −0.001 −0.004 0.087 0.096 −0.115 −0.103
s d.De 0.886 0.874 2.072 2.219 1.796 1.725
sha pe −0.019 −0.014 0.034 0.097 −0.073 −0.100
Bi coin esg + Bi coin Bi coin esg + Bi coin Bi coin esg + Bi coin
Mean −0.461 −0.084 1.664 0.153 −0.040 0.090
s d.De 15.284 3.807 15.670 6.992 13.337 4.072
sha pe −0.031 −0.026 0.105 0.067 −0.004 0.020
sou ce: au ho calcula ions.
his able epo s on he summa y s a is ics o he obse ed e u ns (Mean), isk (s d.De ), and pe o mance measu e (sha pe) o he 5-day
ebalancing scena io assessmen on in es men o single asse : LQ45, gold, c ude oil, go e nmen bonds, and bi coin as compa ed o pai ed
asse s: esg-based equi ies and LQ45, esg-based equi ies and gold, esg-based equi ies and c ude oil, esg-based equi ies and go e nmen
bonds, and esg-based equi ies and bi coin.
16 k. n. asih e al.
5. Discussion
his s udy showed how esg in es ing con ibu es o op imal po olio cons uc ion. Fi s , om a isk pe -
spec i e, he ime- a ying ola ili ies o any indi idual asse a e always highe han hose o pai ed asse s
o esg-based equi ies and any o he asse . his esul sugges s ha he addi ion o esg-based equi ies
can di e si y and educe in es men isk o con en ional and sa e ha ens, commodi ies and digi al asse s,
pa icula ly c ude oil and Bi coin. second, om a pe o mance pe spec i e, he addi ion o esg-based
equi ies imp o es po olio pe o mance o mos asse classes, i.e. gold, go e nmen bonds, and oil, espe-
cially du ing he cOViD-19 pandemic. his demons a es he di e si ying ole o esg-based equi ies and
he hedging unc ions o esg-based equi ies o main ain op imal pe o mance in u bulen imes.
hese esul s we e consis en wi h Dai (2021) and Jin (2022), which s a ed ha esg in es ing can
educe isk and imp o e he isk-adjus ed e u n o he o e all po olio. he esul o he s udy also
ag ees wi h hoepne (2010) ha op imal po olio di e si ica ion, pa icula ly h ough he use o
esg-based asse s, can be achie ed ac oss a a ie y o asse classes. a no able inding o his s udy high-
ligh s ha a high weigh ing o esg-based equi ies in he c ude oil and Bi coin po olio has he po en ial
o educe isk and is consis en wi h liu and hamo i (2020). con e sely, he ela i ely low weigh ing o
esg-based equi ies wi h asse s such as bonds and gold has he po en ial o imp o e po olio pe o -
mance, al hough wi hou associa ed isk educ ion.
O e all, he empi ical esul s o his s udy suppo he ac ha , beyond di e si ica ion, he inclusion
o esg-based equi ies also p o ides insu ance and imp o es po olio pe o mance. Du ing he cOViD-19
pe iod, mos asse classes used in his s udy pe o med posi i ely and e en be e when each indi idual
asse was pai ed wi h esg-based equi ies, pa icula ly gold, easu ies and oil. Mo eo e , a po olio o
esg-based equi ies and Bi coin gene a es posi i e isk-adjus ed e u ns du ing he pandemic, al hough
sligh ly lowe han holding jus Bi coin. he po olio combining esg-based s ocks wi h gold no only
achie ed a highe mean e u n (+5.3 pe cen age poin s) compa ed o a gold-only s a egy, bu also
showed an imp o emen in he associa ed isk (-9.0 pe cen ). in ac , a po olio o esg-based equi ies
and gold achie ed a 3.1 pe cen age poin imp o emen in isk-adjus ed e u ns. his is in ma ked con-
as o he indings o akh a uzzaman e al. (2021) and Ji e al. (2020), which highligh gold’s unwa e -
ing ole as a sa e ha en du ing pe iods o inancial ins abili y caused by he cOViD-19 pandemic, and
ha o salisu e al. (2021), which unde line i s condi ional hedging p ope ies.
Table 8. summa y o he 22-day po olio ebalancing scena io pe o mance.
P e-CoViD-19 CoViD −19 Reco e y
LQ45 esg + LQ45 LQ45 esg + LQ45 LQ45 esg + LQ45
Mean 0.080 0.083 0.034 0.045 −0.003 0.035
s d.De 4.100 4.088 7.593 7.446 3.072 3.265
sha pe 0.016 0.066 0.002 0.017 −0.006 0.005
gold esg + gold gold esg + gold gold esg + gold
Mean 0.109 0.074 0.141 0.130 0.045 0.052
s d.De 1.845 1.645 3.530 3.192 2.455 2.246
sha pe 0.051 0.031 0.035 0.049 0.012 0.012
oil esg + oil oil esg + oil oil esg + oil
Mean −0.089 −0.020 −0.995 −0.267 0.241 0.114
s d.De 5.110 3.071 13.094 7.284 6.342 3.815
sha pe −0.021 −0.015 −0.077 0.031 0.035 0.037
Bond esg + Bond Bond esg + Bond Bond esg + Bond
Mean −0.001 −0.006 0.087 0.110 −0.115 −0.102
s d.De 0.886 0.872 2.072 2.096 1.796 1.756
sha pe −0.019 −0.016 0.034 0.100 −0.073 −0.097
Bi coin esg + Bi coin Bi coin esg + Bi coin Bi coin esg + Bi coin
Mean −0.461 −0.109 1.664 0.218 −0.040 0.074
s d.De 15.284 3.795 15.670 6.977 13.337 4.141
sha pe −0.031 −0.031 0.105 0.076 −0.004 0.021
sou ce: au ho calcula ions.
his able epo s on he summa y s a is ics o he obse ed e u ns (Mean), isk (s d.De ), and pe o mance measu e (sha pe) o he 22-day
ebalancing scena io assessmen on in es men o single asse : LQ45, gold, c ude oil, go e nmen bonds, and bi coin as compa ed o pai ed
asse s: esg-based equi ies and LQ45, esg-based equi ies and gold, esg-based equi ies and c ude oil, esg-based equi ies and go e nmen
bonds, and esg-based equi ies and bi coin.
cOgen BUsiness & ManageMen 17
a simila obse a ion applies o go e nmen bonds, which can be classi ied as less isky asse s. Du ing
he pandemic, a po olio o esg-based equi ies and go e nmen bonds has simila cha ac e is ics o a
po olio o esg-based equi ies and gold. combining esg-based equi ies and go e nmen bonds can
inc ease he po olio’s isk-adjus ed e u n by 5.7 pe cen age poin s. Despi e he p e ailing e idence ha
gold and go e nmen bonds a e a ela i ely s able and isk-mi iga ing asse in u bulen imes, ou
esul s show ha including esg-based equi ies in he in es men po olio can ac ually mi iga e isk e en
u he .
in imes o ma ke u moil and he heal h c isis, he di e si ica ion and hedging unc ion o esg-based
equi ies akes on g ea impo ance, especially wi h Bi coin and c ude oil. By combining Bi coin wi h
esg-based equi ies du ing he cOViD-19 pe iod, he mean e u n dec eases by 1536 pe cen age poin s
compa ed o wha we would achie e i we in es ed exclusi ely in Bi coin, bu he associa ed isk is
educed by 56.4 pe cen . ac oss he sample pe iod, po olios o esg-based s ocks and Bi coin educed
associa ed isk by app oxima ely 66.9 pe cen . gi en he collapse in c ude oil p ices igge ed by he
co ona i us ou b eak, a po olio o esg-based equi ies and c ude oil was success ul in mi iga ing he
losses be o e and du ing he cOViD-19 pe iods (37.8 pe cen age poin s) compa ed o a po olio com-
posed exclusi ely o c ude oil in he same pe iods, and he associa ed isk was signi ican ly educed (50.1
pe cen ). Du ing he eco e y pe iod, combining c ude oil wi h esg-based equi ies con inues o educe
he associa ed isk (43.9 pe cen ) compa ed o in es ing in c ude oil alone.
he ebalancing scena ios aimed a imp o ing pe o mance we e suppo ed by exis ing esea ch
such as ho n and Oehle (2020). he cen al idea behind such ebalancing is he abili y o ecalib a e
a po olio’s asse alloca ion, aligning i wi h an in es o ’s goals and isk ole ance while managing he
dynamic na u e o ma ke condi ions (hong, 2021). his s udy p o ides a no ewo hy inding on ebal-
ancing scena ios. he pe o mance o he isk-adjus ed e u ns o each po olio shows a simila esul
ega dless o he ebalancing scena ios (daily, weekly o mon hly), al hough a sligh ly be e o lowe
alue in some po olios. Bo h esg-based equi ies wi h go e nmen bonds and esg-based equi ies
wi h Bi coin po olios consis en ly expe ienced op imal isk-adjus ed e u ns ac oss all ebalancing
scena ios.
While his s udy con ibu es o he c oss-asse po olio li e a u e in e ms o he impo ance o a
dynamic po olio and unde s anding ebalancing scena ios, i has limi a ions ha mus be acknowl-
edged. Fi s , cons uc ing a po olio using asse classes om di e en ma ke a eas may be limi ed by
he exis ence o di e en ules and egula ions. second, di e ences in ma ke a eas can also impac he
po olio ebalancing p ocess, pa icula ly wi h ega d o ansac ion cos s. hi d, po olio pe o mance
is measu ed using only he sha pe a io. he e o e, p o iding oom o u he esea ch.
6. Conclusion and ema ks
he aim o his s udy is o examine he ole o indonesia’s esg-based equi ies in achie ing op imal po -
olio di e si ica ion and con ibu e o he cu en s a e o knowledge by building a dynamic po olio
consis ing o combining he esg-based equi ies wi h di e en asse classes. he s udy ound ha he
addi ion o esg-based equi ies can di e si y and educe in es men isk. addi ionally, esg-based equi ies
ha e hedging ea u es o main ain op imal pe o mance du ing u bulen imes. his s udy expands ou
unde s anding o he impo ance o dynamic po olios and ac i ely managed po olios.
Du ing he cOViD-19 pandemic, mos asse classes used in his analysis pe o med posi i ely and
e en pe o med be e when each indi idual in es men was pai ed wi h esg-based equi ies, pa icu-
la ly gold, bonds and oil, wi h only Bi coin unde pe o ming. he esul s o his s udy ea i med he
e idence ha go e nmen bonds and gold a e compa a i ely s able and isk- educing in es men s in
unce ain imes. hey also highligh ed he ac ha including esg-based equi ies in in es men po -
olios can help educe isk e en u he . he s udy also highligh s he impo ance o esg-based equi-
ies in po olios con aining iskie asse s such as Bi coin and c ude oil. esg-based equi ies ha e p o en
o be a eliable sou ce o di e si ica ion and hedging in bo h c ude oil and Bi coin po olios. Du ing
he obse a ion pe iod, esg-based equi ies always had a dominan mean dynamic weigh , accoun ing
o mo e han 60 pe cen (c ude oil) and 80 pe cen (bi coin). his sugges s ha esg-based equi ies
18 k. n. asih e al.
no only help educe he isks associa ed wi h in es ing in Bi coin and c ude oil, bu also help p ese e
pe o mance. his means ha indonesia’s esg-based equi ies, al hough s ill a an ea ly s age o de el-
opmen , a e playing qui e an imp essi e ole, simila o hei mo e ma u e esg-based equi ies coun-
e pa s in global ma ke s.
he s udy implies ha in es men manage s and in es o s can educe in es men isk and balance
hei po olio by including esg-based equi ies in hei po olio. he s udy also p o ides a be e
unde s anding o why in es o s suppo he eme gence o esg-based asse s, bu challenges in es -
men manage s o i s ly c ea e mo e di e se esg-based in es men p oduc s and, secondly, o ope -
a e mo e ac i ely managed po olios by ebalancing hei s a egy needs and isk ole ance o he
cus ome . he esul s could encou age policymake s o con inue suppo ing sus ainable inancing
ini ia i es. Finally, his s udy opens se e al a enues o u he esea ch, such as he use o a ious
esg-based asse s, adding mo e di e se asse s, inco po a ing ansac ion cos s in o he ebalancing
s a egy, and inco po a ing o he me hods o calcula ing pe o mance me ics such as eyno and
kappa, o Omega.
Acknowledgmen s
We ex end ou app ecia ion o school o Business, iPB Uni e si y o p o iding access o acili ies and esou ces ha
g ea ly suppo ou esea ch e o .
Au ho s’ con ibu ions
kiki nindya asih and noe azam achsani we e in ol ed in he concep ion and design. kiki nindya asih and an i
no ian i we e in ol ed in he analysis and in e p e a ion o he da a, including d a ing he pape . noe azam
achsani and adle haymans Manu ung we e in ol ed in he c i ical e ision o he in ellec ual con en . all
au ho s ha e gi en inal app o al o he e sion o be published and ag ee o be accoun able o all aspec s o
he wo k.
Consen o publica ion
no applicable.
E hics app o al and consen o pa icipa e
no applicable
Geoloca ion in o ma ion
his s udy was conduc ed a school o Business, iPB Uni e si y, Bogo , indonesia. -6.586648122212661,
106.80609973030377.
Disclosu e s a emen
no po en ial con lic o in e es was epo ed by he au ho (s).
Funding
We do no ecei e any g an s o any o he o ms o unding o his esea ch.
Abou he au ho s
Kiki Nindya Asih is a doc o al candida e a he school o Business a iPB Uni e si y and a cen al banke . she was
known o he wo k on mone a y ope a ions and ins umen s, inancial ma ke s, and he ex e nal sec o . O e he
pas i e yea s, she has been he lead au ho o nume ous in e nal publica ions o he bank.
cOgen BUsiness & ManageMen 19
Noe Azam Achsani is a ull p o esso o economics in he Depa men o economics and Dean o he school o Business,
bo h a iPB Uni e si y. he mainly eaches economics, s a is ics, and econome ics as well as banking and inance. he
se ed as an expe a he Wo ld Food P og am and was a consul an on a ious p ojec s a he Wo ld Bank and he asian
De elopmen Bank. he has published mo e han hund eds o esea ch pape s in epu ed in e na ional jou nals.
Tan i No ian i is a lec u e and ice dean o he school o Business, bo h a iPB Uni e si y. she p ima ily eaches
economics, in e na ional ade, ag icul u al ade, and in e na ional economics and inance. she has published mo e
han 50 esea ch pape s and 7 books ocusing on ade economics, labo economics, indus y, and de elopmen .
Adle Haymans Manu ung is P o esso o capi al Ma ke s and Banking a Bhayangka a Uni e si y Jaka a Raya,
indonesia. he eaches inance cou ses and is also a consul an on co po a e inance ac i i ies. he has published
mo e han 200 scopus a icles. he specialized in po olio managemen , iPOs, isk managemen and capi al s uc u e.
he w o e books wi h 62 i les in he a eas o inance, in es men s, isk managemen , quan i y, and esea ch me hods.
ORCID
kiki nindya asih h p://o cid.o g/0009-0001-3898-977X
noe azam achsani h p://o cid.o g/0000-0002-1478-8586
an i no ian i h p://o cid.o g/0000-0002-7917-3435
adle haymans Manu ung h p://o cid.o g/0000-0002-6212-0214
Da a a ailabili y s a emen
he da a ha suppo he indings o his s udy a e openly a ailable in Bloombe g and Re ini i eikon e minals
(h ps://www.bloombe g.com and h ps://eikon. e ini i .com).
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Appendix A. P uned exac linea ime algo i hm (PELT) o ime se ies change poin
de ec ion
Pel algo i hm de eloped by killick e al. (2012), a me hod de ised o e icien ly de ec ing change poin s wi hin a
ime se ies da ase . such change poin s may indica e signi ican shi s in means o ola ili y, making his analysis
i al o econome ic s udies and ime se ies o ecas ing. ime se ies da a o en con ain poin s whe e he unde lying
s a is ical p ope ies al e , e med as ‘change poin s’. Recognizing hese poin s aids in unde s anding s uc u al
b eaks, egime changes, o shi s in ola ili y. he Pel algo i hm o e s a p ecise and compu a ionally e icien ap-
p oach o his de ec ion p oblem.
Me hodology
Dynamic p og amming
Pel employs a dynamic p og amming app oach o minimize a designa ed cos unc ion. his unc ion measu es
how well a gi en model, inclusi e o ce ain change poin s, explains he obse ed da a.
Cos unc ion
he cos unc ion e alua es he di e gence be ween he ac ual da a and he da a p edic ed by he model ha in-
co po a es he change poin s. his cos can be p edica ed upon shi s in means o a iances ( ola ili y).
P uning mechanism
in de e mining he op imal model, a he han e alua ing a as ange o po en ial models (each deno ing di e en
change poin s), Pel uses a p uning mechanism. By dis ega ding e iden ly subop imal models ea ly on, his mech-
anism accele a es he o e all compu a ion p ocess.
22 k. n. asih e al.
Penal y componen
o ci cum en o e i ing—a scena io whe e he model aligns excep ionally well wi h he sample da a bu pe o ms
inadequa ely on new da a—a penal y is imposed o each added change poin .
S eps o he PELT Algo i hm:
1. ini ializa ion: Begin wi h he assump ion ha he e’s only a single change poin a he s a o he da a.
2. e alua ion loop: Fo each da a poin , :
a. compu e he cos o po en ial change poin s up o .
b. sum up his cos wi h he penal y o adding an ex a change poin .
3. P uning s a egy: a each s ep, disca d change poin candida es ha ha e a highe cos han o he candida es,
ensu ing he algo i hm emains e icien by ocusing only on p obable change poin s.
4. Op imal change Poin s iden i ica ion: a e e alua ing all da a poin s, he change poin s co esponding o he
minimal cos unc ion a e deemed he op imal change poin s.
5. Resul consolida ion: colla e and p esen he iden i ied change poin s in an o de ed manne , deno ing whe e
signi ican shi s in he s a is ical p ope ies o he ime se ies occu .
