Excess Returns with Black Swan Investing on the Indian Stock Market

Sammanfattning: Previous studies have shown a significant relation between the beta value and return of a stock. In our study we show that excess returns on the National Stock Exchange in India can be obtained by using a Black-Swan investment strategy, with beta as a portfolio- building tool. A Black Swan is an unpredicted event that causes major market fluctuations. Observing daily return movements on the CNX Nifty index in India, we implement and evaluate our strategy looking at three different definitions of Black Swans, a daily increase/decrease of ± 4%, 5% and 6%, respectively. The investment strategy yields up to 558% excess returns to the index, a result we have not seen in previous studies.