A Study on Optimum Portfolio Construction Using Sharpe Single Index Model form Nifty50

A Study on Optimum Portfolio Construction Using Sharpe Single Index Model form Nifty50

Authors

  • Aditi Bhatt

Keywords:

Sharpe’s Single Index Model, Beta, Unsystematic Risk, Excess Return to Beta Ratio

Abstract

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.

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References

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Additional Files

Published

10-08-2016

How to Cite

Aditi Bhatt. (2016). A Study on Optimum Portfolio Construction Using Sharpe Single Index Model form Nifty50. Vidhyayana - An International Multidisciplinary Peer-Reviewed E-Journal - ISSN 2454-8596, 2(1). Retrieved from https://vidhyayanaejournal.org/journal/article/view/593
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