An Empirical Study on Pharmaceutical and Personal Care Stocks Using Sharpe's Single-Index Model

2021 ◽  
pp. 139-149
Author(s):  
Divya Bansal ◽  
Srilakshmi Rao ◽  
Karpagam T.
Keyword(s):  
Stock Market ◽  
Empirical Study ◽  
Portfolio Management ◽  
Investment Decision ◽  
Optimal Portfolio ◽  
Personal Care ◽  
Fund Managers ◽  
Index Model ◽  
Single Index Model ◽  
Monthly Return

As the various avenues for better returns in India are slowly dwindling due to various global scenarios as well as due to domestic government policies, more and more people are turning towards stock market for better returns. This poses a challenge to the fund managers when they have to construct a portfolio, which maximizes return and minimizes risk. This has become more and more challenging in the recent years as the investors are also becoming more knowledgeable. Timely and correct investment decision on the part of the investor requires an in-depth knowledge of the stock that he intends to procure and the theories behind portfolio management. This chapter mainly focuses on construction of an optimal portfolio comprising of top pharmaceutical companies and FMCG companies in India. Sharpe ratio return analysis is the tool that is used to construct the optimal portfolio. Monthly returns data of last 10 years of the said companies are regressed against monthly return data of Nifty for better comparison.

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.

Construction of Portfolio Using Sharpe Index Model With Reference To FMCG Industry in India

2014 ◽  
Vol 4 (1) ◽  
Author(s):  
Shantanu Kumar Das
Keyword(s):  
Stock Market ◽  
Investment Decision ◽  
Minimum Risk ◽  
Risk And Return ◽  
Property Insurance ◽  
Index Model ◽  
Bank Deposits ◽  
Single Index Model ◽  
Effective Decision ◽  
Effective Decision Making

Today the avenues for investment are abundant like bank deposits, property, insurance, shares etc. But to take an effective investment decision has become more critical. The evaluation of risk and the return on investment become very crucial. This research paper deals with same type of crucial risk and return analysis. For the analysis, Sharpe index model for the risk and return calculation and portfolio construction has been used. Sharpens single index model is based on the assumption that stocks vary together, because of the common movement in the stock market and there are no effects beyond the market. The study has selected ten companies from FMCG industry, which plays an important role in propelling Indian growth engine. The main objectives of the study are to calculate the beta and variance, to help investors for effective decision making regarding the investment which offer maximum return with minimum risk and also to gain knowledge of the stock market. The findings and suggestion certainly would be helpful to investors.

scholarly journals Analysis of Optimal Portfolio Formation Using a Single Index Model as a Basis for Investment Decision Making [Study on the Jakarta Islamic Index (JII) 2015-2017]

2021 ◽  
Vol 9 ◽  
Author(s):  
Ayun Niyawati ◽  
Wisnu Panggah Setiyono
Keyword(s):  
Investment Decision ◽  
Optimal Portfolio ◽  
Portfolio Risk ◽  
Single Index ◽  
Index Model ◽  
Single Index Model ◽  
Investment Decision Making ◽  
Analysis Technique ◽  
Quantitative Descriptive ◽  
Portfolio Return

The aim of this research is to know the performance ofstocks that become the member ofJakarta Islamic Index  (JII) and determine what stocks are part of the optimal portfolio.  This research is a quantitative descriptive study.  The  technique  of taking samples  is  using purpose  sampling  techniques,  with  determined  criteria.  The population  needed in this study  is  42 stocks.  After doing the sampling purposes,  the sample  is  20 stocks.  The analysis  technique used is  the Single Index Model.  The results of this study reveal that there are 5 stocks which eligible to become optimal portfolio members.  These shares are UNTR, AKRA,  UNVR,  TLKM, and ADRO.  Then the proportion offunds in each consecutive share is 31.58%,  15.18%, 28.02%, 17.7% and 7.52%.  While the portfolio of the portfolio formed (expected portfolio return) is 0. 0203 or 2. 03% with portfolio risk of0. 0006 or 0. 06%.

scholarly journals CONSTRUCTION OF OPTIMAL PORTFOLIO JAKARTA ISLAMIC STOCKS USING SINGLE INDEX MODEL TO STOCKS INVESTMENT DECISION MAKING

2020 ◽  
Vol 2 (1) ◽  
pp. 167-181
Author(s):  
Tri Agus Setyo ◽  
Abitur Asianto ◽  
Augustina Kurniasih
Keyword(s):  
Investment Decision ◽  
Optimal Portfolio ◽  
Portfolio Performance ◽  
Portfolio Risk ◽  
Risk And Return ◽  
Single Index ◽  
Index Model ◽  
Single Index Model ◽  
Investment Decision Making ◽  
Risk Free Rate

This study aims to determine and analyze the optimal portfolio forming stocks using the Single Index Model, determine the optimal portfolio risk and return expectations, then compare the optimal portfolio risk and return expectations with market return expectations, then analyze the optimal portfolio performance using the Treynor model. The research was conducted on the Jakarta Islamic Index stocks. Population of 48 issuers, which meet the sample criteria of 14 issuers. Using monthly data for the period December 2014-November 2019, it was found that 2 stocks entered the optimal portfolio, namely (with a proportion of funds) ICBP (91.46%) and TLKM (8.54%). The value of E (Rp) 0.0128 is greater than the value of E (RM) 0.0003 and the value of the risk free rate is 0.0048. The value of σp 0.0438 is greater than the value of σ2M 0.0364. The value of portfolio performance with the Treynor index is 0.0091.

scholarly journals Metode Penentuan Portofolio Optimal Menggunakan Model Indeks Tunggal Sharpe Saham-Saham LQ45 Tahun 2019

2020 ◽  
Vol 1 (2) ◽  
pp. 68
Author(s):  
Wibisono Hardjopranoto
Keyword(s):  
Portfolio Management ◽  
Economic Value ◽  
Portfolio Analysis ◽  
Optimal Portfolio ◽  
Characteristic Line ◽  
Markowitz Model ◽  
Single Index ◽  
Index Model ◽  
Single Index Model ◽  
Risk Characteristic

Abstrak--Konstruksi portofolio optimal menjadi fokus perhatian dan semakin menantang bagi manajemen investasi karena pada umumnya investor bermotif untuk memaksimalkan economic value-nya dengan memainkan peran dua variabel utamanya, imbal hasil (return) dan risiko (risk). Single Index Model(SIM) William Sharpe (1963) merupakan model yang sederhana terutama jika dibandingkan dengan model Markowitz (1952), terutama karena pertimbangan jumlah variabel masukannya. Model Markowitz dikatakan memiliki keterbatasan praktis serius; model Sharpe menyederhanakannya (http://www.economicsdiscussion.net/portfolio-management/theories-portfolio-management/sharpe-theory-of-portfolio-management-financial-economics/29763 [r. 07/05/20]).Penelitian ini bermaksud menggambarkan portofolio optimal seperti apa yang dapat dibentuk dari saham-saham LQ45 tahun 2019 menggunakan SIM tersebut. Hasilnya memperlihatkan 27 saham LQ45 terpilih dari 45 saham yang pantas menjadi anggota portofolio optimal dalam pembobotan mulai dari bobot yang tertinggi ke bobot terendah. Dengan tetap menyadari sepenuhnya bahwa SIM hanya menggunakan indeks (pasar) sebagai satu-satunya faktor pembentuk risiko berinvestasi,penerapan model ini memberikan pembelajaran yang amat berharga justru karena kesederhanannya sehingga mampu memberikan gambaran yang jelas dan dengan demikian tetap perlu dipelajari sebagai pengetahuan dasar dalam Mengelola Portofolio/ Investasi. Kata kunci: Sharpe’s Single Index Model, Portfolio Analysis, Optimal Portfolio Con-struction, Risk Characteristic Line. Abstract--Optimal portfolio construction is the focus of attention and is increasingly challenging for investment management because in general investors are motivated to maximize their economic value by playing the role of two main variable, return and risk. William Sharpe’s (1963) Single Index Model (SIM) is a simple model especially when compared to the Markowitz model (1952), mainly because of the consideration of the number of input variables. The Markowitz model is said to have serious practical limitations; the Sharpe model simplifies it (http://www.economicsdiscussion.net/portfolio-management/ theories-portfolio-management/sharpe-theory-of-portfolio-management-financial-econo-mics/29763 [r. 07/05/20]). This study intends to describe what optimal portfolio can be formed from LQ45 shares in 2019 using the SIM. The results show 27 selected LQ45 shares from 45 shares that deserve to be members of the optimal portfolio in weighting starting form the highest weight to the lowest weight. By being fully aware that SIM uses only the index (market) as the sole factor for investment risk, the application of this model provides valuable learning precisely because of its simplicity so as to provides a clear picture and thus need to be learned as basic knowledge in Managing Portfolio/ Investments. Keywords: Sharpe’s Single Index Model, Portfolio Analysis, Optimal Portfolio Con-struction, Risk Characteristic Line.  

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