Stability of Beta: An Empirical Examination

Abstract

The importance of beta is raised in the way back in 1964 by William Sharpe in Capital Asset Pricing Model (CAPM). Although many previous studies upheld that beta alone cannot predict the stock return more accurately and encourages factors such as market capitalization and book to market ratio cause to vary in stock returns Fama French three-factor model (1992). This present study examines the risk-return relationship and betas performance in the Indian BSE market. The study used BSE 200 index stocks. Because of the availability of complete information study used only 198 stocks. By applying methods like Regression analysis, Correlation coefficient, T-statistics samples have been tested. The study evidenced a positive relationship for 67 stocks. The correlation coefficient is strong only for 10 companies.