BUILDING AN EFFICIENT PORTFOLIO USING SHARPE’S SINGLE INDEX MODEL (AN EMPIRICAL STUDY WITH REFERNCE TO BSE – 30)

BUILDING AN EFFICIENT PORTFOLIO USING SHARPE’S SINGLE INDEX MODEL (AN EMPIRICAL STUDY WITH REFERNCE TO BSE - 30)

*Vaibhavi Lambore **Omkar Gopale***Ravichandra Reddy

ABSTRACT

Investors increase their wealth by diversifying their portfolio and investing their savings across a range of different assets. Since stocks have produced larger returns than any other asset over a decade, they play a significant role in portfolios. But in order to ensure a healthy growth of the portfolio, it is essential to carefully assess and analyse the performance of the stocks before considering investing in any of them. Every investment a person makes includes a risk component. If the risk in the portfolio is not adequately handled, an investor may lose more money than they may possibly gain. Building a stable portfolio requires effective risk management. Any stock that is being thought about for inclusion in the portfolio should be examined. The stock's risk as well as the likelihood of suffering a loss greater than the stated risk should be carefully considered. As it increases the wealth of both individuals and institutions, the stock market is essential to the nation's economy. But if investors don't invest their money properly, it could occasionally wipe out their fortune. One of the finest strategies for managing money is to research stocks, their volatility, and their past prices in order to forecast their future values. The present study attempts to evaluate the performance of the selected public sector companies and build a portfolio using Sharpe’s Single Index model for five year period starting from 2018 and ending at the end of 2022.

Keywords: Volatility, portfolio, diversifying, beta, standard deviation, cut-off point.