The Single Index Model & the Construction of Optimal Portfolio : A Case of Banks Listed on NSE India

Risk and return plays an important role in making any investment decisions. Decision include investment should be done or not and which securities should be included in portfolio. Determining efficient portfolios within an asset class (e.g., stocks) can be achieved with the single index (beta) model proposed by Sharpe. Sharpe's single-index model was applied by using the monthly closing prices of 9 companies listed in NSE and CNX BANK price index for the period from January 2009 to December 2013. From the empirical analysis it can be concluded that out of 9 companies 2 companies are selected for investment purpose on the basis of cut-off point which is 0.438