A Study on Optimum Portfolio Construction Using Sharpe Single Index Model form Nifty50
Keywords:
Sharpe’s Single Index Model, Beta, Unsystematic Risk, Excess Return to Beta RatioAbstract
Portfolio management is fundamental because it reduces risk by diversifying investments and shifting funds across assets based on their performance. When it comes to investment decisions, risk and return are critical factors to consider. Investments should be made or not, and which securities should be included in the portfolio are among the decisions that must be made using Sharpe’s Single Index Model. The main aim of this paper is to get comprehensive understanding of Sharpe’s Single Index Model and to construct an optimal portfolio using this method. In this study, totally 30 securities have been selected from NSE. For this, the monthly closing price of all selected securities for the period from 1st April 2011 to 31st March 2016 have been considered. Sharpe Single Index Model formulate a cut-off rate and select those securities whose excess return to beta ratio is greater than cut-off rate. The study reveals that out of 30 companies only 6 companies are selected to constitute optimum portfolio. Proportion of Investment in each selected securities are computed on the basis of Beta, Unsystematic Risk, Excess return to beta ratio and Cut-off rate of each related securities.
Downloads
References
Nandan, T., & Srivastava, N. (2014). Construction of optimal portfolio using sharpe’s single index model: an empirical study on nifty 50 stocks. Journal of Management Research and Analysis, 4(2), 74-83.
Nalini, R. (2014). Optimal Portfolio construction using Sharpe’s Single Index Model-A study of selected stocks from BSE. International Journal of Advanced Research in Management and Social Sciences, 3(12), 72-93.
Mandal, N. (2013). Sharpe’s single index model and its application to construct optimal portfolio: an empirical study. Great Lake Herald, 7(1), 1-19.
Subashree, M. S., & Bhoopa, D. M. (2014). Construction Of Optimal Portfolio Using Sharpe’s Single Index Model-A Study With Reference To Banking And Automobile Sectors. Issn (Print), 2320-5504.
Poornima, S., & Remesh, A. P. (2014). OPTIMAL PORTFOLIO CONSTRUCTION OF SELECTED STOCKS FROM NSE USING SHARPE’S SINGLE INDEX MODEL. Journal Homepage: http://www. ijmra. us, 7(12).
Singh, S., & Gautam, J. (2014). The single index model & the construction of optimal portfolio: A case of banks listed on NSE India. Risk governance & control: financial markets & institutions, 4(2), 110-115.
Sarker, M. R. (2013). Markowitz portfolio model: evidence from Dhaka Stock Exchange in Bangladesh. International Organization of Scientific Research Journal of Business and Management, 8(6).
Varadharajan, P. (2012). Construction of equity portfolio of large caps companies of selected sectors in India with reference to the Sharpe Index Model. International Journal of Physical and Social Sciences, 2(8), 37-50.
Murthy, J. (2014). The construction of optimal portfolio using sharpe's single index model-an empirical study on nifty metal index. Sumedha Journal of Management, 7(1), 126-134.
Mary, J. F., & Rathika, G. (2014). The single index model and the construction of optimal portfolio with cnxpharma scrip. International Journal of Management, 6(1), 87-96.
Sen, K., & Fattawat, C. D. (2014). Sharpe’s single index model and its application portfolio construction: an empirical study. Global Journal of Finance and Management, 6(6), 511-516.
JOSHI, K., & PARMAR, D. C. APPLICATION OF MARKOWITZ MODEL IN INDIAN STOCK MARKET-REFERENCE TO BOMBAY STOCK EXCHANGE.
Sathyapriya, M. (2015). Optimum Portfolio Construction Using Sharpe Index Model with Reference to Infrastructure sector and Pharmaceutical Sector. International Journal of Scientific and Research Publications, 6(8), 490-496.
