STRATEGIC EQUITY PORTFOLIO CREATION

AND EVALUATION USING CAPM, SHARPE’S

RATIO, REWARD-TO-VOLATILITY RATIO AND
MONTE CARLO SIMULATION

A Research Project Proposal submitted in partial fulfilment of the

requirements for the CIA III

Bachelor of Business Administration

(Finance & Accountancy)
CHRIST (Deemed to be University), Bangalore Central Campus

Submitted By

S Pandey (1310651)

Department of Professional Studies

School of Commerce, Finance and Accountancy

Academic Year 2021-22

 TABLE OF CONTENTS
S. No CONTENTS PAGE
NUMBER
1 CHAPTER 1 1-8
INTRODUCTION
1.1 What is Portfolio Creation? 2
1.2 What is Portfolio Evaluation? 2
1.3 Information Technology (IT) Sector 2
1.4 Automobile Sector 4
1.5 Fast Moving Consumer Goods (FMCG) Sector 6
1.6 Capital Asset Pricing Model (CAPM) 7
1.7 Sharpe’s Ratio 7
1.8 Reward-to-Volatility Ratio (Treynor’s Ratio) 8
1.9 Monte Carlo Simulation 8

2 CHAPTER 2 9-16
REVIEW OF LITERATURE

3 CHAPTER 3 17-25
RESEARCH DESIGN
3.1 Title 17
3.2 Statement of Problem 17
3.3 Scope 17
3.4 Objectives 17
3.5 Methodology 18
3.6 Sources of Data 23
4 CHAPTER 4 27-35
CONCLUSION
4.1 Expected Outcome 27
4.2 Limitation 28
4.3 Conclusion 31

5 BIBLIOGRAPHY 44

6 ANNEXURE 46
(Questionnaire)
Abstract

The research project titled “Strategic Equity Portfolio Creation and Evaluation
Using CAPM, Sharpe’s Ratio, Reward-To-Volatility Ratio and Monte Carlo
Simulation” aims to create a simple strategic equity portfolio model in Three
Industries- IT, Automobile and FMCG with 5 companies in each.

Portfolio from Information Technology (IT) industry consisting of equity from

Infosys Ltd, Wipro Ltd, MphasiS Ltd, HCL Technologies Ltd and Cyient Ltd;
portfolio from Fast Moving Consumer Goods (FMCG) industry consisting of
equity from Hindustan Unilever Ltd, Procter & Gamble Hygiene and Healthcare
(P&G) Ltd, Marico Ltd, Nestle India Ltd and Indian Tobacco Company (ITC) Ltd
and the Last portfolio from automobile sector consisting of equity from Maruti
Suzuki India Ltd, Hero MotoCorp Ltd, Bajaj Auto India Ltd, Mahindra and
Mahindra Ltd and Tata Motors Ltd. The main assumption is that the investor has a
limited funding and average risk-taking ability and is interested in investing in only
one sector or industry. These portfolios are evaluated and optimal portfolio
selection is based on the performance under CAPM, Sharpe’s Ratios and Treynor’s
Reward to Volatility Ratio. The optimal portfolios are further tested under the
Monte Carlo Simulation to predict its ROI and come to an investment decision.

Index Words: Portfolio, Investor, CAPM, Sharpe’s Ratios, Treynor’s Reward to

Volatility Ratio
 CHAPTER - 1
INTRODUCTION
 CHAPTER – 1
INTRODUCTION
1 Introduction
The world ‘Investment’ is quite fascinating to everyone as it gives ample opportunity for one to
have a positive rate of return while undergoing the risks.

1.1 Meaning of Portfolio

The world ‘Investment’ is quite fascinating to everyone as it gives ample opportunity for one to
have a positive rate of return while undergoing the risks.
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 ANNEXURE
QUESTIONNAIRE
(If applicable)
QUESTIONNAIRE: A SURVEY OF HUMAN MINDS