CONSTRUCTING AN OPTIMAL PORTFOLIO WITH AND WITHOUT SHORT SELLING USING SINGLE INDEX MODEL

This paper aims at building an optimal portfolio from all 100 scrips of S&P CNX 500, using Sharpeʹs Single Index Model. Rigorous mathematical explanation is provided for the design of the model which is applied on all 100 scrips. This model then is used to arrive at two different optimal portfolios with two different strategies; one portfolio design entails short selling certain scrips while the other aims at sieving out certain scrips entirely out of the investment basket. A joint comparison of both these portfolios, reveal some interesting results.