Systematic Risk of Stocks: The Return Interval Effect on Beta
Published: 2014
Author(s) Name: Neeraj Sanghi, Gaurav Bansal |
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Abstract
Capital Asset Pricing Model (CAPM) and Market Model are the standard directives to describe the relationship between risk and return of investments. Both the models claim that the inherent risk of a security should be measured by beta. In India, leading stock exchanges disseminate beta values of prominent stocks by using daily paired observations of stock and key index returns. However, some other
investment institutions and practitioners advocate weekly or monthly returns for beta estimations. This study aims to investigate the impact of return intervals on the estimation of beta. Beta coefficients of fifty most prominent stocks listed on National Stock Exchange (NSE) of India are estimated on the bases of daily, weekly, and monthly returns using S&P CNX Nifty as a proxy of the market. Results show that the return intervals have a significant impact on the estimation of beta.
Keywords: CAPM, Market Model, Beta, Return Interval, Systematic Risk, NSE
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