CONSTRUCTION OF AN OPTIMAL PORTFOLIO USING THE SINGLE INDEX MODEL: AN EMPIRICAL STUDY OF PRE AND POST COVID 19

Abstract

The financial markets have been significantly influenced by Covid19. Investors have reallocated their portfolios as a result of
changing expectations for risk and return. In both academia and industry, building a portfolio via wise stock selection has
been seen as a problem. The stock market's inherent uncertainties are to blame for this. Stock selection in a portfolio is
impacted by anticipated price movement. The predictability of stock price changes has been disputed for a very long time,
however. The random walk hypothesis (Fama, 1995) states that since stock price changes are unpredictable and lack
memory, the past cannot foretell the future. Therefore, if the market is efficient, the stock price at the moment represents all
the information. Since insider trading is required, it is impossible to outperform the market and is compatible with EMH.
Therefore, the quest for effective forecasting techniques does not lead to consistent, long-term trends that can be predicted.
According to the findings, investors have begun redistributing their portfolios across other equities in response to the current
financial crisis related to COVID-19. But not all investors experience the same situation when switching from risky to riskfree investments