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- Title
Beta Estimation in the Indian Stock Market: Stability, Stationarity and Computational Considerations.
- Authors
Singh, Rohini
- Abstract
Beta is a widely accepted measure of systematic risk and is used by practitioners for capital budgeting, portfolio formation, and performance evaluation. It is important to know whether beta is stationary overtime and to identify the factors that may help forecast it. Since beta represents co-movement with the market, it is pertinent to check if betas of individual stocks and portfolios change over bull and bear market phases. Regression analysis, paired t-tests, and correlation analysis were used to study beta for 158 stocks and 15 portfolios in the Indian stock market over 12 years from 1991 to 2002. Regression analysis indicates that alpha and beta were not significantly different for majority of the individual stocks and portfolios during the alternating market phases. Paired t-tests, on the other hand, shows evidence of non-stationarity in some of the alternating periods and stationarity between all bull periods. Analysis of the control groups also reveal that the overall period was not stationary. Although correlation between pairs of periods was fairly high and significant in some cases, it was not consistent group-wise and was at odds with the t-tests in some cases. Overall, the evidence of non-stationarity of beta between bull and bear periods was not consistent and cannot be put to practical use.
- Publication
Decision (0304-0941), 2008, Vol 35, Issue 2, p63
- ISSN
0304-0941
- Publication type
Academic Journal