Title: A study on the performance evaluation of equal-weight portfolio and optimum risk portfolio on the Indian stock market

Authors: Abhiraj Sen; Jaydip Sen

Addresses: Department of Computer Science and Engineering, Jadavpur University, No. 188, Raja Subodh Chandra Mallick Road, Jadavpur, Kolkata – 700032, West Bengal, India ' Department of Data Science and Artificial Intelligence, Praxis Business School, Bakrahat Road, Rasapunja, Kolkata – 700104, West Bengal, India

Abstract: Designing an optimum portfolio for allocating suitable weights to its constituent assets so that the return and risk associated with the portfolio are optimised is a computationally hard problem. The seminal work of Markowitz that attempted to solve the problem by estimating the future returns of the stocks is found to perform sub-optimally on real-world stock market data. This is because the estimation task becomes extremely challenging due to the stochastic and volatile nature of stock prices. This work illustrates three approaches to portfolio design minimising the risk, optimising the risk, and assigning equal weights to the stocks of a portfolio. Thirteen critical sectors listed on the National Stock Exchange (NSE) of India are first chosen. Three portfolios are designed following the above approaches choosing the top ten stocks from each sector based on their free-float market capitalisation. The portfolios are designed using the historical prices of the stocks from 1 January 2017 to 31 December 2022. The portfolios are evaluated on the stock price data from 1 January 2022 to 31 December 2022. The performances of the portfolios are compared, and the portfolio yielding the higher return for each sector is identified.

Keywords: return; risk; minimum risk portfolio; MRP; mean-variance portfolio; optimum risk portfolio; ORP; Sharpe ratio.

DOI: 10.1504/IJBFMI.2025.142945

International Journal of Business Forecasting and Marketing Intelligence, 2025 Vol.10 No.1, pp.37 - 95

Received: 17 Apr 2023
Accepted: 23 Apr 2023
Published online: 02 Dec 2024 *

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