An Empirical investigation of the Markowitz and Sharpe's Single index model in building optimum Portfolio

Abstract

The main emphasis of this study is to build and compare an optimum portfolio using the Harry Markowitz model and the Sharpe’s single index model on selected securities from DJIA index. Only securities having an NPM more than or equal to 10%, a ROE greater than or equal to 10%, an LR greater than or equal to 1, an ICR greater than or equal to 10%, and an ATOR greater than or equal to 0.50 are chosen. The findings revealed that the portfolio expected returns are nearly identical between two models with the greater wider variation in the portfolio risk.Despite the coefficient of variation is less than one in both the models, HMM is more consistent than that of SIM.