A Study On Application Of Sharpe Single Index Model In Optimization Of Select Portfolio W.R.T. Smc Global Securities

Abstract

Portfolio optimization plays a crucial role in helping investors achieve maximum returns while minimizing investment risk. The Sharpe Single Index Model is a widely used portfolio selection technique that simplifies the process of identifying optimal securities by considering the relationship between individual stock returns and overall market performance. This study examines the application of the Sharpe Single Index Model in optimizing a selected portfolio with reference to SMC Global Securities. The research analyzes historical price data of selected stocks from different sectors to estimate expected returns, systematic risk (beta), unsystematic risk, and excess return-to-beta ratios. Based on these parameters, the model identifies the most suitable securities for inclusion in an optimal portfolio while determining their respective investment weights. The study demonstrates how diversification and scientific portfolio construction can reduce unsystematic risk and improve the risk-return trade-off for investors. The findings indicate that the Sharpe Single Index Model provides a practical and efficient framework for portfolio optimization, enabling investors associated with SMC Global Securities to make informed investment decisions. The study concludes that the model serves as a valuable tool for achieving balanced portfolio performance by maximizing expected returns at an acceptable level of risk, thereby supporting effective investment management in dynamic financial markets.