Optimal portfolio construction in stock markets: Evidence from Indian blue chip stocks

Abstract

Portfolio Construction is done by emphasising on high returns with diversifiable risk. Investors always prefer to maintain acceptable returns to risk ratio. The present study is a focus to construct an optimal portfolio of selected Blue Chip Stocks of India with the application of Sharpe Single Index Model. In this study a sample of twenty Blue Chip NSE and BSE listed Stocks has been considered. The daily closing share prices of the Stocks for a time span from 1st January 2007 to 31st October 2017 have been used in the study. The characteristics such as returns in association with the systematic and unsystematic risk of selected Stocks were analysed. The analyses concluded that the first ranked nine blue chip Stocks are preferable in the construction of an optimal portfolio and thereby to spread the availability of funds. The analytical findings will be the significant outcome to all the participants of financial markets.