Date Bajaj FinanHeroMoto RCeliance -AInfosys -AdHDFC BankNestle - AdMarket

1/4/2024 7705.55 3946.95 2596.65 1512.7 1663.8 27116.4 21647.2

1/1/2024 7384.8 3989.85 2583.3 1490 1653.05 26635.2 21618.7
12/1/2023 7327.75 4139.55 2584.95 1542.9 1559 26580.3 21731.4
11/1/2023 7121.9 3819.05 2377.45 1455.15 1476.7 24096.14 20133.15
10/1/2023 7492.65 3088.35 2287.9 1350.914 1526.55 24094.8 19079.6
9/1/2023 7810.75 3057.25 2345 1417.108 1571.95 22376.88 19638.3
8/1/2023 7163 2915.95 2398.527 1417.108 1644.8 21859.39 19253.8
7/1/2023 7300.3 3168.055 2540.277 1338.377 1701.75 22423.01 19753.8
6/1/2023 7099.523 2877.721 2541.273 1283.679 1593.085 22762.04 19189.05
5/1/2023 6930.229 2729.192 2461.206 1267.147 1668.916 21547.9 18534.4
4/1/2023 6226.533 2530.132 2411.98 1204.14 1591.503 21527.9 18065
3/1/2023 5568.841 2321.233 2322.845 1372.542 1583.1 19493.07 17359.75
2/1/2023 6059.966 2331.367 2314.375 1429.829 1585.275 18469.67 17303.95

MEAN
Variance
Std Dev

Risk Free return

Beta
RETURNS Annual returns
Bajaj FinanHeroMoto Reliance Infosys HDFC BAN NESTLE Market
4.34% -1.08% 0.52% 1.52% 0.65% 1.81% 0.13% 27.16% 69.30%
0.78% -3.62% -0.06% -3.43% 6.03% 0.21% -0.52%
2.89% 8.39% 8.73% 6.03% 5.57% 10.31% 7.94%
-4.95% 23.66% 3.91% 7.72% -3.27% 0.01% 5.52%
-4.07% 1.02% -2.43% -4.67% -2.89% 7.68% -2.84%
9.04% 4.85% -2.23% 0.00% -4.43% 2.37% 2.00%
-1.88% -7.96% -5.58% 5.88% -3.35% -2.51% -2.53%
2.83% 10.09% -0.04% 4.26% 6.82% -1.49% 2.94%
2.44% 5.44% 3.25% 1.30% -4.54% 5.63% 3.53%
11.30% 7.87% 2.04% 5.23% 4.86% 0.09% 2.60%
11.81% 9.00% 3.84% -12.27% 0.53% 10.44% 4.06%
-8.10% -0.43% 0.37% -4.01% -0.14% 5.54% 0.32%

2.20% 4.77% 1.03% 0.63% 0.49% 3.34%

0.00369 0.006115 0.001257 0.003129 0.001716 0.001835 0.000934
6.07% 7.82% 3.54% 5.59% 4.14% 4.28% 3.06%

6%
0.63 1.97 1.04 0.50 0.34 0.48
12.20% 5.80% 4.95% 46.82% 25.10%
Answer William Sharpe's Single Index Model

Step 1 Excss to Beta ratio

Stock Mean return Rf

Bajaj Finance 27.16 6
HeroMoto 69.3 6
Reliance 12.2 6
Infosys 5.8 6
HDFC BANK 4.95 6
NESTLE 46.82 6

Step 2 Determing Cut off rate

Ranked stock Ri-Rf/Beta Beta^2

NESTLE 85.0416666666667 0.3969
Bajaj Finance 33.5873015873016 3.8809
HeroMoto 32.1319796954315 1.0816
Reliance 5.96153846153846 0.25
Infosys -0.4 0.1156
HDFC BANK -3.08823529411765 0.2304

Step 3 Optimal Cut off Point is Infosys i.e.

Hence Other securities should be selected

Step 4 Determine the proportions of each sec.

Stocks (Excess return to Beta - optimal cut off rate) * Beta/unsystematic risk
NESTLE 1.94858209056709
Bajaj Finance -80.4522769623493
HeroMoto -3.92195389105047
Reliance -11.4464040290129
HDFC BANK -2.88153120106853

-96.7535839929141

Step 5 Convert the proportions into appropriation rate

Stock Column1
NESTLE -2.0139637315242
Bajaj Finance 83.1517279693137
HeroMoto 4.05354895311961
Reliance 11.8304703108995
HDFC BANK 2.97821649819149
Total 100
Ri - Rf Beta Ri-Rf/Beta Ranking
21.16 0.63 33.5873015873016 2
63.3 1.97 32.1319796954315 3
6.2 1.04 5.96153846153846 4
-0.2 0.5 -0.4 5
-1.05 0.34 -3.08823529411765 6
40.82 0.48 85.0416666666667 1

Total Risk systematic Risk Unsystematic Risk (Ri-Rf)*Beta / Unsystematic risk CF

18.3184 3.71641284 14.60198716 1.34184476299731 1.341845
36.8449 36.33919524 0.50570476 26.3608355199188 27.70268
61.1524 10.12766976 51.02473024 2.44393256786378 30.14661
12.5316 2.3409 10.1907 0.632733767062125 30.77935
31.2481 1.08243216 30.16566784 -0.00331502688852786 30.77603
17.1396 2.15737344 14.98222656 -0.0238282339791289 30.7522

117.8927
Beta^2 / unsystematic risk CF2 Cut off rate C
0.0271812319550074 0.027181 4.18921954455
7.67424059840765 7.701422 108.336552467
0.0211975642970102 7.722619 115.879850671
0.0245321714896916 7.747152 117.891084443
0.0038321710831382 7.750984 117.892666904
0.015378221593253 7.766362 117.866809866