Fortune 2007 Index : Analysis

Two Fortune India Index was created by using two different methods. One was by using equal weights for all the 39 companies that were selected. Click here to read more about the original Index. The second method gave weights equal to the market cap of each individual share on the particular day. In other words the second portfolio was assumed to be dynamically adjusted to have weights depending upon the market cap of the shares.




The returns calculated was the log return for the entire period starting from beginning of year to end of October. Similarly Beta was calculated by using the daily log returns.

It was found that the returns were as high as 80% in case of equal weights compared to only 23% and 26% for Sensex and Nifty. At the same time what was more interesting was that the Beta of the Index was very low around 0.82. If Beta is taken as the measure of risk (CAPM) then the alpha, or the excess return created for the level of risk taken (beta) would be very high.