Optimizing portfolio through Sharpe Single Index Model

This research investigates the efficacy of the Sharpe single-index model in portfolio construction, aiming to provide valuable insights for investors seeking superior risk-adjusted returns. Employing a dynamic approach, the study analyzes the performance of the Sharpe model in comparison to the Tehran Stock Exchange (TSE) market index during the initial ۹ months of the Persian calendar year ۱۴۰۲. The findings reveal that the Sharpe single-index portfolio outperforms the market, showcasing both reduced risk and enhanced returns. Despite the observed superiority, caution is advised due to the higher beta of the portfolio, resulting in more significant declines during market downturns and heightened growth during market upturns. The research emphasizes the importance of continuous risk assessment, dynamic resource allocation, and strategic asset diversification to optimize the risk-return profile of the portfolio. In conclusion, while the Sharpe single-index model offers a promising framework for constructing portfolios with attractive risk-adjusted returns, investors should approach its implementation judiciously. Regular monitoring, adjustment, and consideration of alternative variables, such as inflation rates and gross domestic product, could further enhance the model's applicability. The study provides actionable recommendations for investors and researchers to refine their portfolio strategies, contributing to the ongoing discourse on portfolio optimization in dynamic market conditions.