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Testing the Stationarity of Beta for Automotive and Auto-Ancillary Sector Stocks in Indian Stock Market

Mihir Dash and Silky Sonthalia Sundarka
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Mihir Dash: Alliance University, India
Silky Sonthalia Sundarka: Alliance University, India

Journal of Applied Management and Investments, 2015, vol. 4, issue 2, 76-81

Abstract: Beta is the central concept in the CAPM model. If betas vary considerably across time, the CAPM model’s explanatory power would be undermined. The objective of the study is to test the stationarity of beta for automotive and auto-ancillary sector stocks in different market regimes in Indian stock markets. The study was performed using a sample of eleven automotive and auto-ancillary sector stocks listed on the Bombay Stock Exchange, India, over a study period of 10 years. The study period was sub-divided into phases based on overall market trends: Stagnant phase (Apr. 2001 - Mar. 2003), Growth phase (Apr. 2003 - Mar. 2005), Boom phase (Apr. 2005 - Dec. 2007), Depression phase (Jan. 2008 - Mar. 2009), and Steady phase (Apr. 2009 - Mar. 2011). The analysis was performed through the application of univariate ANCOVA. The results indicate that the betas were relatively stationary over the different market regimes for all of the sample stocks. This suggests that beta can be taken to be stationary for automotive and auto-ancillary sector stocks in Indian stock markets.

Keywords: time-varying beta; automotive and auto-ancillary sector; Indian stock market; univariate ANCOVA (search for similar items in EconPapers)
Date: 2015
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