Authors

1. Dr. Shalini Talwar
2. Ms. Gunjan Pathak

Affiliation

• Associate Professor Department of Finance and Law, K.J. Somaiya Institute of Management Studies and Research, Mumbai, Maharashtra
• Student, K.J. Somaiya Institute of Management Studies and Research, Mumbai, Maharashtra

Abstract

The purpose of this study is to investigate the reliability of beta as the predictor of volatility of stock
prices for select stocks listed on NSE. The stocks identified for the study are Ambuja Cement,
Ultratech Cement, L&T, Asian Paints, ITC, HUL, Cipla, Dr. Reddys Lab, HCL, Infosys, HDFC Bank,
SBI, Hero Motors, Mahindra & Mahindra, and Tata Motors. These stocks represent 6 key sectors of
the Indian Economy, namely, Pharma, FMCG, Construction, Banking & Financial Services, IT, and
Automobile. The study has used monthly closing stock prices of the selected stocks for 48 months
ending June 2016 to measure their beta. Further, daily data for the same stocks is taken for a 180
days period starting from June 01, 2016 to test the reliability of beta estimated through the 48 month
data. Nifty 50 closing levels have been taken for the same data duration to represent the market for
beta calculations. Secondary data extract from Yahoo Finance has been analyzed through
regression analysis using MS Excel 2010.
No specific conclusion could be drawn based on the study. Beta was seen to hold for few stocks but
for most it did not. No sector specific conclusions could be drawn based on the analysis undertaken in
the current study as no such pattern emerged. Statistical analysis of the output reveals that beta
calculated and used so freely by industry for portfolio optimization purpose may lack statistical
validity in many cases.

Keywords

Beta, Alpha, r-square, Multiple r, Regression, Standard Error, Nifty 50,, Systematic Risk

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