Portfolio Selection Revisited: Evidence from the Indian Stock Market

The IUP Journal of Applied Finance, Vol. 18, No. 3, pp. 31-47, July 2012

Posted: 6 Nov 2012

See all articles by Kushankur Dey

Kushankur Dey

Xavier University, Bhubaneswar (XUB)

Debasish Maitra

Institute of Rural Management, Anand

Date Written: November 5, 2012

Abstract

This paper is an attempt to examine the reliability and usefulness of ex ante measures of portfolio formulation by selecting securities from a well-defined sampling frame. Four indices are employed to achieve the objectives of the study, namely, Sharpe index, Treynor index, Jensen index and Sortino index. Incorporation of the four indices helps in understanding theoretical underpinnings of both modern and post-modern portfolio theories. The study is conducted in the Indian context with special reference to S&P500 CNX NIFTY index, wherein the selection of the security for constructing the index is subject to three criteria: liquidity, market capitalization, and floating stocks. Using the Sharpe’s algorithm, cut-off is calculated to formulate the portfolio of 26 stocks out of 50 stocks. A comprehensive analysis of each individual stock, portfolio, and index is presented with respect to their annualized returns, annualized standard deviations, betas, residual variances or deviations. This study provides a basis for a large section of investors, especially retail investors, for analyzing, selecting, and evaluating their portfolios as an index tracker onto some specific reference point.

Suggested Citation

Dey, Kushankur and Maitra, Debasish, Portfolio Selection Revisited: Evidence from the Indian Stock Market (November 5, 2012). The IUP Journal of Applied Finance, Vol. 18, No. 3, pp. 31-47, July 2012, Available at SSRN: https://ssrn.com/abstract=2171164

Kushankur Dey (Contact Author)

Xavier University, Bhubaneswar (XUB) ( email )

XIMB Campus,
Xavier Square
Bhubaneswar, Odissa 751013
India

Debasish Maitra

Institute of Rural Management, Anand ( email )

Anand - 388 001
India

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