Optimal Portfolio Construction Using Sharpe’s Single Index Model-A Study of Selected Stocks from NGSE

Abstract

This study uses Sharpe Single Index Model (SSIM) to construct an optimal portfolio. The sample for
this study was based on the large listed Nigerian companies listed on NGSE. Monthly closing stock
price of the companies was obtained from www.investing.com over the period of October 2019 to
November 2019. The findings are highly encouraging as results show the cut-off rate and stocks with higher excess return to beta ratio which form the optimal portfolio. This study is highly useful for investors and companies.

Keywords: Sharpe’s single index model, cut-off rate, Optimal portfolio, beta, diversification market return and Variance.

JEL Classification: G11