An Empirical Study on the Utility of Sharpe's Single Index Model in Optimal Portfolio Construction

2014 ◽  
Vol 8 (9) ◽  
pp. 57
Author(s):  
R. Nalini
Keyword(s):  
Empirical Study ◽  
Optimal Portfolio ◽  
Portfolio Construction ◽  
Single Index ◽  
Index Model ◽  
Single Index Model

scholarly journals PENGARUH PEMILIHAN INDEKS PASAR DALAM PEMBENTUKAN PORTOFOLIO MODEL INDEKS TUNGGAL

2020 ◽  
Vol 8 (1) ◽  
pp. 1
Author(s):  
Ezra Putranda Setiawan
Keyword(s):  
Empirical Study ◽  
Standard Error ◽  
Stock Exchange ◽  
Optimization Method ◽  
Optimal Portfolio ◽  
Single Index ◽  
Index Model ◽  
Single Index Model ◽  
Market Index ◽  
Index Value

Portfolio is a type of investment consists of several assets, such as stocks. Single index model is a portfolio optimization method that uses the market index value to calculate beta as a measure of asset’s performance. However, there are several market index available in Indonesia Stock Exchange. In this study, we examine and compare the performance of several market index to the portfolio’s performance that calculated using Single-Index Model. We choose several stocks that used in several market index, obtain the return data, and obtain the beta using several market index. The calculation of the optimal portfolio were repeated using 15 sets of data to obtain consistency. Based on the empirical study, we obtain that the way to choose the market index could affect the estimated beta as well as its standard error. However, it has a very small effect on the weight and the performance of the optimal portfolio.

scholarly journals Optimal Portfolio Construction: Application of Sharpe's Single-Index Model on Dhaka Stock Exchange

2019 ◽  
Vol 16 (1) ◽  
pp. 60
Author(s):  
Imroz Mahmud
Keyword(s):  
Stock Exchange ◽  
Sampling Technique ◽  
Optimal Portfolio ◽  
Portfolio Construction ◽  
Efficient Manner ◽  
Great Opportunity ◽  
Single Index ◽  
Index Model ◽  
Single Index Model ◽  
Industrial Sectors

This study aims to find whether Sharpe's single-index model of portfolio construction offers better investment alternatives to the investors of the Dhaka Stock Exchange (DSE). For this purpose, month-ended closing price data of 178 companies listed on the DSE, the prime bourse of Bangladesh, and the month-ended index value of DSEX have been used for the period starting from January 2013 to February 2018. The stocks selected for this study belong to 16 industrial sectors, and purposive sampling technique has been used to select these sectors. Sharpe's model formulates a unique cut-off rate and selects the stocks having an excess return-to-beta ratio above that rate. In this study, 54 stocks qualified to be a part of the optimal portfolio. Hence, the proportion of investment to be made on each of the stock is calculated according to the model. The study reveals that three industries occupy a hefty chunk (65.78%) of the proposed investment portfolio. The constructed portfolio offers a monthly return of 2.1489% and carries 1.9516% risk as measured by standard deviation. The beta of the optimal portfolio is only 0.124003. The constructed portfolio outperforms every individual stock as well as the market index in terms of offering the optimal risk-return combinations. Therefore, this five-and-a-half-decade-old model offers a great opportunity for Bangladeshi investors to optimize return and diversify risk in an efficient manner.

ANALISIS PORTOFOLIO OPTIMAL DENGAN MENGGUNAKAN MODEL INDEKS TUNGGAL PADA SAHAM IDX BUMN20 DI BURSA EFEK INDONESIA JANUARI 2018-JANUARI 2019

2019 ◽  
Vol 4 (2) ◽  
Author(s):  
Mochamad Andik Firmansyah
Keyword(s):  
Stock Exchange ◽  
Optimal Portfolio ◽  
Rate Of Return ◽  
Portfolio Risk ◽  
Expected Return ◽  
Purposive Sampling ◽  
Single Index ◽  
Index Model ◽  
Market Return ◽  
Single Index Model

Penelitian ini bertujuan untuk menentukan level of expected return dan the best risk of optimal portfolio  formation dengan menggunakan Single Index Model pada saham IDX BUMN 20 yang tercatat di Indonesia Stock Exchange dari bulan Januari 2018 sampai January 2019. Saham IDX BUMN 20 yang tercatat di Indonesia Stock Exchange dengan populasi sebanyak 20 perusahaan. Dengan menggunakan populasi sebesar 20 perusahaan maka peneliti menggunakan purposive sampling, dan ternyata hanya 18 perusahaan saja yang ditemukan memenuhi kriteria penelitian ini. Penelitian ini juga menggunakan metode Kuantitatif Deskriptif. Analisa data pada penelitian ini untuk menentukan saham-saham mana saja yang termasuk the optimal portfolio, dan juga the level of proportion of 1 funds yang termasuk juga dalam kategori the optimal portfolio dan the level of expected return serta the best risk of the optimal portfolio yang terbentuk dengan menggunakan Single Index Model. Hasil dari penelitian ini menunjukan bahwa terdapat 5 perusahaan dengan kategori the optimal portfolio dari 18 sampel perusahaan pada saham IDX BUMN 20 dengan tingkat tertinggi dari level of proportion of 1 funds ditemukan pada PTBA share sat 1.89333 or 189,333%, di lain pihak dengan tingkat terendah adalah pada TLKM shares at -2.13488 or -213.488% yang berarti bahwa saham TLKM adalah negatif dan harus dijual dalam jangka waktu pendek sebesar 213,488% dari dana yang dimiliki oleh para inventor dan menghasilkan rate of return yang diharapkan dari formasi optimal portfolio sebesar 0.17583 or 17.583% lebih tinggi dari yang diharapkan oleh market return sebesar 0.00264 or 0.264% dan memiliki tingkat portfolio risk borne sebesar 0.10384 or 10,384%, lebih kecil dari the risk of market sebesar 0.03367 or 3,367% dan beta market sebesar 1.Kata Kunci : Portfolio, Optimal Portfolio, Single Index Model.

ANALISIS DIVERSIFIKASI INTERNASIONAL : PEMBENTUKAN PORTOFOLIO OPTIMAL INDEKS SAHAM DUNIA (Studi Kasus Pada Indeks Saham Aktif Dunia Versi The Wall Street Journal)

2019 ◽  
Vol 6 (02) ◽  
Author(s):  
Rony Mahendra ◽  
Erwin Dyah Astawinetu
Keyword(s):  
Wall Street Journal ◽  
Optimal Portfolio ◽  
Stock Index ◽  
Wall Street ◽  
Expected Return ◽  
Single Index ◽  
Index Model ◽  
Single Index Model ◽  
Stock Indices ◽  
The Wall Street Journal

The research objective is to establish an optimal portfolio and know the difference between risk and return stock index portfolio candidates and non-candidates. Method used in the preparation of this research portfolio is the single index model, while the samples of this study are active world stock indices version of The Wall Street Journal during the period August 2012 - August 2016 and The Global Dow is used as the benchmark stock index. In establishing the optimal portfolio is used two perspectives: the Rupiah perspective and the U.S. Dollar perspective. The results showed there were three stock indices from the perspective of Rupiah and 8 share index menurutperspektif U.S. Dollar that make up the optimal portfolio, with the cut-of-pointsebesar 0,01393menurut Rupiah perspective and the perspective of 0.0078 US Dollars Based on the perspective of return expectations Rupiah obtained by 0.0258 with a risk of 0.06512. Berdarkan perspective of US Dollars, obtained return expectations at 0.0154 with a risk of 0.0292. From the test results showed that the hypothesis, the return on both perspectives there are significant differences between the index of the candidate, with a non-candidate. Then the risk of stock index, among the candidates, with a non-candidate, the Rupiah perspective there is no difference, but in the perspective of US Dollars, there are significant differences.Keywords: Single Index Model, candidate portfolio, optimal portfolio, expected return, excess return to beta, cut-off-point

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