Business

Examining the superiority of the Sharpe single-index model of portfolio selection: A study of the Indian mid-cap sector

J. Mistry and R. A. Khatwani

This study, conducted by Janki Mistry and Ritesh Ashok Khatwani, reveals that Sharpe's single-index model can significantly enhance portfolio optimization in the Indian mid-cap sector. The optimal portfolio constructed from Indian mid-cap companies outperformed the Nifty mid-cap 100 index, showcasing higher returns and lower risk over five years. Despite its dependence on historical data, this model proves to be a user-friendly and effective tool for investors.

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Abstract

This study examines the efficacy of Sharpe's single-index model for portfolio optimization in the Indian mid-cap sector. An optimal portfolio of Indian mid-cap companies was constructed using the model, and its performance was compared to the benchmark Nifty mid-cap 100 index. The optimal portfolio yielded significantly higher returns and lower risk than the benchmark over the five-year study period, demonstrating the model's effectiveness even in the riskier mid-cap market. While the model's reliance on historical data is a limitation, its simplicity and superior performance make it a valuable tool for investors and portfolio managers.

Publisher

Humanities and Social Sciences Communications

Published On

Apr 26, 2023

Authors

Janki Mistry, Ritesh Ashok Khatwani

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