Static Systematic Risk Profile of Nifty 100 Stocks: A Year on Year Analysis of Beta
Published: 2017
Author(s) Name: Neeraj Sanghi |
Author(s) Affiliation: Associate Prof. & Area Chairperson (Finance), Inst. of Mgt. Studies, Ghaziabad, Uttar Pradesh, India
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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 securitys 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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