Performance Evaluation of Portfolio using the Sharpe, Jensen, and Treynor Methods
Journal Title: Scholars Journal of Economics, Business and Management - Year 2016, Vol 3, Issue 7
Abstract
This paper attempts to get an insight and to construct an optimal portfolio empirically using Sharpe’s single index model, Further, we evaluate portfolio and market returns using Sharpe, Jensen and Treynor Ratio. The study is based on secondary data collected from www.nseindia.com and www.riskcontrol.com. Taking Nifty- 50 as the Market Performance Index (MPI) and considering weekly closing share prices of all the stocks for the period between 1stJanuary 2015 to 31st December 2015, the cut- off rate has been computed and those securities are selects to construct an optimal portfolio whose excess return to beta ratio is greater than the cut-off rate. Our study shows that the composition of the optimal portfolio would be 0.80 % of fund invested in Infosys 0.20 % of fund invested in Bank of Baroda. Evaluation of Portfolio and market return by Sharpe, Jensen and Treynor Ratio show market returns is lower than that of the securities. And Treynor measure has a positive return on portfolio, however other ratios consistently giving negative return in 2015. Keywords:Sharpe Ratio, Portfolio Optimization, Jensen’s Alpha, Treynor Ratio, systematic risk, unsystematic risk, diversified portfolios, Beta, Cut-off Rate, Expected Return on security, Risk free rate
Authors and Affiliations
Dr. Monica Verma, Mr. Jayshil R. Hirpara
Keywords
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