A Manifestation of the Robustness of Sharpe Single Index Model

Miklesh Prasad Yadav and Dr. Sudhi Shrama

Several studies have done on Sharpe Single Index Model, are purely based on the application of the model that applied on stocks, on indices and funds (Joshi. A, 2011; Parmar, 2012). The paper focuses on filling the gap of the current stock of knowledge to analyze the robustness of the model further. Securities included in comprising portfolio are also authenticating with its annual return in the market and with its financial health. The paper has two broad objectives, i.e. the manifestation of the model and analysis of the robustness or effectiveness of the model. The analysis of the paper divided into three sections. The first section deals with the application of Sharpe Model, the second section deals in analyzing the robustness of the model and the third section deals with the allocation of weights in select stocks. By the application of Sharpe, ten shares have filtered, i.e. Asian Paints, Lupin, Sun Pharmaceuticals, Maruti Suzuki India, Bajaj Auto, Axis Bank, HDFC Ltd, Housing Development Finance Corporation, Kotak Mahindra and Tata Consultancy. Analyzing returns of select stocks and linking with the financial health of the companies, validates the robustness of the model up to 80%. All the stocks except Sun Pharma and Axis Bank financials are supporting the outperformance and the results of Sharpe. Lastly, eight stocks have selected for the calculation of weights by Z Values.

Volume 11 | 10-Special Issue

Pages: 986-1000

DOI: 10.5373/JARDCS/V11SP10/20192896