SECURITY ANALYSIS

ANALYSIS OF BETA
BANKING INDUSTRY
Shweta Sharma 09BS0002290
OBJECTIVE:-

The objective of the assignment is to calculate and compare the BETA for an industry by taking
its three companies listed on Indian stock exchange and three companies listed on foreign stock
exchange. The comparison has to be done between the two BETA’s , i.e., one average of Indian
companies and one of foreign companies.

METHODOLOGY:-

The industry taken for the analysis is BANKING.

The two indices chosen are:-

 BOMBAY STOCK EXCHANGE (BSE)

 NEW YORK STOCK EXCHANGE (NYSE)

The banks selected for the study are:-

 ICICI BANK
 HDFC BANK
 STATE BANK OF INDIA
 BANK OF AMERICA
 DEUTSCHE BANK
 ALLIED IRISH BANK

A weekly data for three years starting from July 2007 to July 2010 is taken. Data includes the
adjusted closing price of the security and the index. Their respective returns are calculated and
then the Beta is found out.
INTRODUCTION TO BETA:-

Beta (β) of a stock or portfolio is a number describing the relation of its returns with that of the
financial market as a whole.

 An asset with a beta of 0 means that its price is not at all correlated with the market.

 A positive beta means that the asset generally follows the market.

 A negative beta shows that the asset inversely follows the market; the asset generally
decreases in value if the market goes up and vice versa.

Beta is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to

the market as a whole. Beta is used in the capital asset pricing model (CAPM), a model that
calculates the expected return of an asset based on its beta and expected market returns.

FINDINGS:-

Average Beta of industry as per Indian index:-

1.267

Average Beta of industrys as per foreign index:-

1.653
ANALYSIS:-

As per the findings shown above, it can be said that the banks listed on the Indian stock
exchange are relatively less volatile as compared to the banks listed on the foreign stock
exchange. This means, these are the aggressive stocks and they are affected more than the
market.

A beta of greater than 1 indicates that the securities price will be more volatile than the market.

Beta of 1.267 means that theoretically stock is 26.7% more volatile than the market and beta of
1.653 means that the stock is 65.3% more volatile than the market.

Therefore it is not a good option for risk averse investors to invest in the banking industry stocks
since they are highly risky. However for risk loving investors, it is a good choice to invest in this
sector as with the high risk, comes higher return.
ANNEXURES:-
 ICICI HDFC SBI SENSEX
Date Adj Close Adj Close Adj Close Adj Close
7/19/2010 902.8 2033.55 2437.15 17977.23
7/12/2010 902.45 2038.7 2441.15 17955.82
7/5/2010 871.55 2003.1 2368.85 17833.54
6/28/2010 840.1 1913 2265.25 17460.95
6/21/2010 857.5 1947.8 2300.8 17574.53
6/14/2010 867.2 1991.65 2372.7 17570.82
6/7/2010 845.35 1943.6 2338 17064.95
5/31/2010 866.4 1887.7 2341.8 17117.69
5/24/2010 863.75 1888.3 2235.3 16863.06
5/17/2010 834.8 1824.7 2271.55 16445.61
5/10/2010 911.75 1953.2 2222.65 16994.6
5/3/2010 876.45 1847.4 2226.35 16769.11
4/26/2010 950.5 1991.6 2297.95 17558.71
4/19/2010 975.75 1944.35 2255.6 17694.2
4/12/2010 921.65 1956.95 2046.8 17591.18
4/5/2010 977.45 1949.9 2106.55 17933.14
3/29/2010 953.05 1939.05 2103.7 17692.62
3/22/2010 947.7 1948.1 2072.75 17644.76
3/15/2010 954.85 1818.2 2058.5 17578.23
3/8/2010 936.9 1800.8 2045.5 17166.62
3/2/2010 901.8 1784.5 2046.45 16994.49
2/22/2010 871.85 1704.65 1975.85 16429.55
2/15/2010 830.5 1699.55 1903.9 16191.63
2/8/2010 826.3 1595.75 1917.6 16152.59
2/1/2010 798.35 1573.1 1896.65 15790.93
1/25/2010 830.4 1630.85 2047.44 16357.96
1/18/2010 840.65 1679.35 2079.47 16859.68
1/11/2010 841.15 1691 2133 17554.3
1/4/2010 873.8 1713.55 2275.26 17540.29
12/29/2009 875.7 1700.4 2257.8 17464.81
12/21/2009 862.7 1711.65 2206.72 17360.61
12/14/2009 808.8 1664.9 2133.94 16719.83
12/7/2009 863.25 1783.35 2254.12 17119.03
11/30/2009 871.35 1784.25 2315.71 17101.54
11/23/2009 851.25 1747.7 2230.99 16632.01
11/16/2009 897.3 1755.5 2323.76 17021.85
11/9/2009 909.4 1722.85 2286.26 16848.83
11/3/2009 848.75 1639.95 2192.89 16158.28
10/26/2009 789.6 1621.3 2179.76 15896.28
10/20/2009 904.2 1689.25 2341.77 16810.81
10/12/2009 958.5 1719.35 2441.31 17322.82
10/5/2009 901.35 1673.6 2055.4 16642.66
9/29/2009 924.45 1643.05 2198.56 17134.55
9/22/2009 838.6 1608.55 2128.17 16693
9/14/2009 843.35 1523.6 2131.31 16741.3
9/7/2009 835.7 1491 1908.95 16264.3
RETURN ICICI RETURN SENSEX BETA (ICICI)
0.000387833 0.001192371 1.67899421
0.035454076 0.006856743 1.67898857
0.03743602 0.021338472 1.67864346
-0.020291545 -0.006462762 1.67856086
-0.011185424 0.000211146 1.67830884
0.025847282 0.029643802 1.67824274
-0.024295937 -0.003081023 1.68032223
0.003068017 0.015099869 1.68002199
0.034678965 0.025383674 1.6809645
-0.084398135 -0.032303791 1.68161027
0.040276114 0.013446748 1.67833216
-0.077906365 -0.044969135 1.67773048
-0.02587753 -0.007657311 1.677226
0.058699072 0.005856344 1.67679505
-0.057087319 -0.019068607 1.67624123
0.025602015 0.013594369 1.67451072
0.005645246 0.00271242 1.67444336
-0.007488087 0.003784795 1.67444309
0.019158928 0.023977347 1.67451621
0.038922156 0.010128577 1.67603118
0.034352239 0.034385604 1.67550122
0.049789284 0.014694012 1.67799742
0.0050829 0.00241695 1.67701534
0.035009708 0.022903021 1.67701537
-0.038595857 -0.034663858 1.67731543
-0.012192946 -0.029758572 1.67944473
-0.000594424 -0.039569792 1.68316124
-0.03736553 0.000798733 1.69190519
-0.002169693 0.004321833 1.69171499
0.01506897 0.006002093 1.69177837
0.066641939 0.038324552 1.69172596
-0.063075586 -0.023319078 1.69156916
-0.00929592 0.001022715 1.6895941
0.023612335 0.028230503 1.68954944
-0.051320629 -0.022902328 1.69164697
-0.013305476 0.010268962 1.69055134
0.071458027 0.042736603 1.69138388
0.074911348 0.016481844 1.69166905
-0.126741871 -0.054401305 1.68947164
-0.056651017 -0.029556966 1.68283069
0.063404893 0.040868467 1.68196871
-0.024987831 -0.028707495 1.68282596
0.102373003 0.026451207 1.68508614
-0.0056323 -0.002885081 1.68051224
0.009154003 0.029328037 1.68048692
0.123177206 0.036661075 1.68421671
-0.025666208 -0.014647345 1.67714102
0.024140012 0.044716069 1.67705004
0.002015723 -0.01108254 1.684562
0.008265023 0.016582191 1.68539623
-0.027666162 -0.03255009 1.68645136
-0.010171481 0.018944714 1.68948968
0.032864166 0.043000572 1.69203017
0.180459496 0.091874984 1.69790407
-0.165904118 -0.094469609 1.69053931
-0.000397693 0.010051718 1.6879148
0.056882662 0.016716144 1.68852766
-0.036059153 -0.04699126 1.68697643
0.000472909 0.008897908 1.69439626
0.014113456 0.032703714 1.69482697
0.053923692 0.053149854 1.69976963
0.223427562 0.14077638 1.70719646
0.103442898 0.025006673 1.71790236
0.089692386 0.041495188 1.71172159
0.104613507 0.006549534 1.70870887
-0.020277727 0.027756282 1.70556081
0.110016588 0.020291822 1.71383833
0.103958304 0.043969222 1.70695615
-0.064764314 0.029889068 1.70141155
0.192927864 0.120647776 1.71728029
0.045995529 0.023989877 1.72586607
0.146302857 0.05174145 1.7254616
-0.179200049 -0.063631896 1.71106469
-0.023382979 0.005473126 1.69209465
-0.226539864 -0.082153748 1.69376581
0.067338388 0.035897756 1.66112576
-0.022477937 -0.013091772 1.66018359
0.142753664 0.086449129 1.66004473
-0.140695698 -0.069634122 1.66166285
-0.067944484 -0.008810957 1.65260972
-0.034699636 -0.055406488 1.651524
0.127416221 0.067456897 1.66530847
-0.114427647 -0.076336324 1.66080209
0.147039961 0.042294844 1.66439884
0.147856617 0.080853746 1.64541922
0.020073362 -0.014024406 1.63900608
0.047246 0.019910916 1.64087989
-0.15256453 -0.050100049 1.63884557
-0.081852628 -0.058094455 1.62062469
0.079876995 0.018004589 1.62389747
0.288239916 0.124926015 1.61716073
-0.208581645 -0.127742886 1.54324765
0.075820929 -0.052479851 1.53399944
-0.278305303 -0.159541669 1.58924792
-0.101104902 -0.043951465 1.55872057
-0.106437643 -0.066950475 1.54722386
-0.037916829 0.002964828 1.54692004
-0.049908425 -0.033348914 1.54825412
0.02330643 -0.005540859 1.54934392
RETURN HDFC BETA(HDFC)
-0.00252612 0.94168902
0.017772453 0.94166813
0.047098798 0.94150361
-0.017866311 0.93953966
-0.022016921 0.93901371
0.024722165 0.93884654
0.029612756 0.93966346
-0.000317746 0.94022806
0.034855045 0.94128084
-0.065789474 0.94052341
0.057269676 0.93485881
-0.072404097 0.93274303
0.02430118 0.92582617
-0.006438591 0.92696992
0.00361557 0.92723731
0.005595524 0.92884946
-0.004645552 0.92938808
0.071444286 0.92942294
0.009662372 0.92891329
0.009134211 0.93044573
0.04684246 0.93058012
0.003000794 0.92891347
0.065047783 0.92974152
0.014398322 0.92939989
-0.035410982 0.93033304
-0.028880222 0.92937846
-0.006889415 0.92880162
-0.013159814 0.93382283
0.007733474 0.93372432
-0.006572605 0.93371571
0.028079765 0.93398084
-0.06641994 0.93575384
-0.000504414 0.93031126
0.0209132 0.93028996
-0.004443179 0.9313953
0.018951157 0.93285756
0.050550322 0.93264115
0.011503115 0.93130777
RETURN SBI BETA(SBI)
-0.0016386 1.090915
0.03052114 1.090897
0.04573447 1.090609
-0.0154511 1.089465
-0.030303 1.089164
0.01484175 1.088975
-0.0016227 1.090764
0.04764461 1.090736
-0.0159583 1.089603
0.02200076 1.093054
-0.0016619 1.098732
-0.0311582 1.099448
0.01877549 1.101626
0.1020129 1.102359
AVERAGE(ICICI) 1.602
-0.0283639 1.101288 AVERAGE(HDFC) 1.008
0.00135476 1.100625
0.01493185 1.101203
AVERAGE(SBI) 1.191
0.00692252 1.101189
0.00635541 1.101189
-0.0004642 1.102751 INDUSTRY AVERAGE 1.267
0.03573146 1.10312
0.03779085 1.103647
-0.0071443 1.102883
0.01104579 1.102914
-0.0736481 1.104072
-0.015403 1.099641
-0.0250961 1.101049
-0.0625247 1.103085
0.00773319 1.10276
0.02314748 1.102764
0.03410593 1.102611
-0.0533157 1.103974
-0.0265966 1.101414
0.03797417 1.101293
-0.0399224 1.101063
0.01640233 1.099536
0.04257852 1.099515
0.0060236 1.10067
-0.0691827 1.101462
-0.0407732 1.09891
0.18775421 1.09755
-0.0651153 1.079824
0.03307537 1.075938
-0.0014733 1.075881
0.11648288 1.075843
0.08781377 1.068448
-0.0099074 1.06312
0.00270419 1.063278
-0.0114921 1.070234
0.03189433 1.070114
-0.0397741 1.069553
0.06800294 1.068614
0.01423718 1.06598
0.0849005 1.070896
-0.1474886 1.076241
0.03527627 1.059208
0.01426989 1.058529
0.05335871 1.058931
-0.0844544 1.076565
-0.0273931 1.079246
0.07934588 1.086974
0.31963709 1.083589
-0.0097326 0.990863
0.03713687 0.994758
-0.0230134 0.995953
0.00111088 0.997056
0.14551614 1.000673
-0.0043186 0.989377
0.01777217 0.999009
0.18017255 1.001033
0.00051471 0.969684
0.01296938 0.972881
-0.0839685 0.983156
-0.018631 0.976675
-0.1234572 0.978003
0.06764993 0.960978
-0.0293852 0.955348
0.10602731 0.954537
-0.1061774 0.945565
-0.0414534 0.93131
-0.0857839 0.930595
0.06891114 0.920508
-0.0336992 0.919799
 bank of america deutsche bank AIB NYSE
Date Adj Close Adj Close Adj Close Adj Close
7/19/2010 13.36 60.42 2.31 6731.16
7/12/2010 13.98 61.23 2.28 6709.51
7/6/2010 15.11 62.97 2.45 6808.71
6/28/2010 13.84 56.5 2.19 6434.81
6/21/2010 15.42 58.99 2.52 6763.93
6/14/2010 15.82 61.98 2.94 6988.25
6/7/2010 15.6 58.59 2.27 6814.76
6/1/2010 15.35 55.33 2.33 6600.27
5/24/2010 15.73 59.57 2.64 6791.57
5/17/2010 15.98 60.19 2.75 6775.45
5/10/2010 16.33 60.87 3.21 7077.64
5/3/2010 16.17 59.15 3.03 6916.18
4/26/2010 17.82 68.68 3.84 7474.4
4/19/2010 18.42 72.1 4.1 7701.61
4/12/2010 18.4 74.17 4.2 7584.62
4/5/2010 18.58 78.25 4.09 7629.05
3/29/2010 18.03 78.45 3.33 7539.02
3/22/2010 17.89 77.48 4.45 7403.58
3/15/2010 16.81 73.36 4.17 7386.85
3/8/2010 16.84 72.44 3.95 7362.85
3/1/2010 16.69 69.41 3.85 7291.31
2/22/2010 16.64 63.5 2.83 7035.04
2/16/2010 15.86 64.93 3.07 7083.25
2/8/2010 14.43 60.57 3.19 6874.56
2/1/2010 14.98 59.54 3.31 6782.75
1/25/2010 15.16 60.97 3.48 6883.78
1/19/2010 14.88 62.14 3.93 7030.61
1/11/2010 16.24 69.73 4.32 7356.79
1/4/2010 16.76 76.85 4.71 7425.35
12/28/2009 15.04 70.91 3.51 7184.96
12/21/2009 15.23 72.6 3.81 7255
12/14/2009 15.01 71.99 3.17 7086.19
12/7/2009 15.61 70.02 3.94 7125.12
11/30/2009 16.26 73.7 4.71 7182.71
11/23/2009 15.44 71.24 4.9 7070.09
11/16/2009 16.06 73.38 5.16 7084.47
11/9/2009 15.95 75.22 5.81 7119.89
11/2/2009 15.02 71.83 5.78 6958.29
10/26/2009 14.55 71.63 5.59 6739.45
10/19/2009 16.19 79.2 7.39 7066.8
10/12/2009 17.23 81.91 7.94 7133.96
10/5/2009 17.47 78.6 8.96 7015.54
9/28/2009 16.31 72.76 8.6 6674.57
9/21/2009 16.57 75.73 9.41 6823.51
9/14/2009 17.6 77.05 9.84 7016.92
9/8/2009 16.94 72.51 7.36 6843.82
return nyse return BA beta (BA)
0.00322676 -0.04435 2.368757
-0.0145696 -0.07478 2.369841
0.05810583 0.091763 2.3674
-0.0486581 -0.10246 2.380096
-0.0320996 -0.02528 2.38175
0.02545798 0.014103 2.387808
0.03249716 0.016287 2.393706
-0.0281673 -0.02416 2.403456
0.00237918 -0.01564 2.40782
-0.0426964 -0.02143 2.408264
0.02334526 0.009895 2.421913
-0.0746843 -0.09259 2.427459
-0.0295016 -0.03257 2.454841
0.01542464 0.001087 2.459356
-0.0058238 -0.00969 2.462356
0.01194187 0.030505 2.462352
0.01829385 0.007826 2.462566
0.00226484 0.064247 2.466202
0.00325961 -0.00178 2.465418
0.00981168 0.008987 2.465699
0.03642765 0.003005 2.466684
-0.0068062 0.04918 2.482371
0.03035685 0.099099 2.483857
0.01353581 -0.03672 2.48119
-0.0146765 -0.01187 2.48641
-0.0208844 0.018817 2.487533
-0.0443373 -0.08374 2.493297
-0.0092332 -0.03103 2.497604
0.03345739 0.114362 2.49712
-0.009654 -0.01248 2.492978
0.02382239 0.014657 2.49324
-0.0054638 -0.03844 2.499039
-0.0080179 -0.03998 2.49848
0.01592908 0.053109 2.497701
-0.0020298 -0.03861 2.497077
-0.0049748 0.006897 2.496984
0.0232241 0.061917 2.497201
0.03247149 0.032302 2.497415
-0.0463222 -0.1013 2.506214
-0.0094141 -0.06036 2.508018
0.01687967 -0.01374 2.506421
0.05108494 0.071122 2.511925
-0.0218275 -0.01569 2.528349
-0.0275634 -0.05852 2.531379
0.02529289 0.038961 2.531854
0.03114147 -0.00703 2.536142
-0.0107184 -0.04905 2.551388
return AIB beta(AIB)
0.0131579 2.583357
-0.0693878 2.583244
0.1187215 2.581568
-0.1309524 2.589212
-0.1428571 2.588349
0.2951542 2.580584
-0.0257511 2.554236
-0.1174242 2.569897
-0.04 2.564847
-0.1433022 2.565603
0.0594059 2.559617
-0.2109375 2.559628
-0.0634146 2.553215
-0.0238095 2.554763
0.0268949 2.559331
0.2282282 2.560274
-0.2516854 2.548963
0.0671463 2.57461
0.0556962 2.573722
0.025974 2.572816
0.360424 2.572776
-0.0781759 2.527224
-0.0376176 2.525775
-0.0362538 2.542089
-0.0488506 2.546922
-0.1145038 2.546258
-0.0902778 2.540853
-0.0828025 2.545241
0.3418803 2.543012
-0.0787402 2.501849
0.2018927 2.499793
-0.1954315 2.482988
-0.163482 2.479636
-0.0387755 2.475246
-0.0503876 2.481606
-0.1118761 2.481496
0.0051903 2.479865
0.0339893 2.486198
-0.2435724 2.494165
-0.0692695 2.46647
-0.1138393 2.464602
0.0418605 2.478675
-0.0860786 2.501861
-0.0436992 2.498206
0.3369565 2.50044
0.0589928 2.465223
-0.136646 2.468859
return DB beta(DB)
-0.01323 1.821657
-0.02763 1.820042
0.114513 1.819895
-0.04221 1.818096
-0.04824 1.827038
0.05786 1.828236
0.058919 1.827078
-0.07118 1.827313
-0.0103 1.824916
-0.01117 1.825182
0.029079 1.836931
-0.13876 1.838519
-0.04743 1.837689
-0.02791 1.838421
-0.05214 1.842576
-0.00255 1.841603
0.012519 1.843108
0.056161 1.845109
0.0127 1.844378
0.043654 1.844283
0.093071 1.843115
-0.02202 1.838952
0.071983 1.838685
0.017299 1.836551
-0.02345 1.837166
-0.01883 1.837292
-0.10885 1.838898
-0.09265 1.833232
0.083768 1.830336
-0.02328 1.827048
0.008473 1.826756
0.028135 1.83109
-0.04993 1.83176
0.034531 1.830616
-0.02916 1.830364
-0.02446 1.830299
0.047195 1.83001
0.002792 1.82977
-0.09558 1.839319
-0.03309 1.836468
0.042112 1.83576
0.080264 1.835081
-0.03922 1.839373
-0.01713 1.83913
0.062612 1.842868
0.040166 1.841183
0.005046 1.844485
AVERAGE BETA(BA) 1.907816
AVERAGE BETA(DB) 1.377909
AVERAGE BETA(AIB) 1.672936

INDUSTRY AVERAGE 1.652887