International Journal of Financial Management

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Static Systematic Risk Profile of Nifty 100 Stocks:A Year on Year Analysis of Beta


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1 Institute of Management Studies, Bulandshahar Road Industrial Area, Ghaziabad, Uttar Pradesh, India
     

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Beta Coefficient, as a measurement statistic of systematic risk of securities, was initially explained by Sharpe as a slope of simple linear regression function using rate of return on a market index as independent variable and a security's rate of return as dependent variable. National Stock Exchange (NSE), the leading stock exchange of India, practice this ordinary least square (OLS) regression based single index market model for disseminating beta coefficients of prominent NIFTY 100 stocks. OLS regression based index model presumes that beta coefficients of securities should remain stable for accuracy of predicted returns. Brenner and Smidt (1977) emphasized the importance of having accurate beta forecast mainly because of (i) understanding risk-return relationships in capital market theory and (ii) extensive usage of beta in making investment decisions. The objective of this paper is to examine year on year stability of beta coefficients of NIFTY 100 index stocks.

Keywords

Systematic Risk, Beta, Single Index Market Model, NIFTY 100 Index.
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  • Static Systematic Risk Profile of Nifty 100 Stocks:A Year on Year Analysis of Beta

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Authors

Neeraj Sanghi
Institute of Management Studies, Bulandshahar Road Industrial Area, Ghaziabad, Uttar Pradesh, India

Abstract


Beta Coefficient, as a measurement statistic of systematic risk of securities, was initially explained by Sharpe as a slope of simple linear regression function using rate of return on a market index as independent variable and a security's rate of return as dependent variable. National Stock Exchange (NSE), the leading stock exchange of India, practice this ordinary least square (OLS) regression based single index market model for disseminating beta coefficients of prominent NIFTY 100 stocks. OLS regression based index model presumes that beta coefficients of securities should remain stable for accuracy of predicted returns. Brenner and Smidt (1977) emphasized the importance of having accurate beta forecast mainly because of (i) understanding risk-return relationships in capital market theory and (ii) extensive usage of beta in making investment decisions. The objective of this paper is to examine year on year stability of beta coefficients of NIFTY 100 index stocks.

Keywords


Systematic Risk, Beta, Single Index Market Model, NIFTY 100 Index.

References