Modelling systematic risk in Indian stock market

Abstract

Capital Asset Pricing Model is widely used for estimating systematic risk in the form of Beta. Present study is an attempt to estimate systematic risk of top 10 companies of SENSEX, an index of Bombay Stock Exchange. For the purpose of the study monthly prices, converted to simple return, of the selected companies and SENSEX for 11 calendar years have been analysed. For risk free return, return on 91 days Treasury Bills has been considered. Results of the study show that Beta of 7 companies out of 10 companies considered, is greater than 1, indicating that these companies return is more volatile than the market return.