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I. Risk
II. Statistical Estimation
III. Ambuja Cements Ltd - Company Background
IV. Methodology
V. The beta () for Yearly share prices
VI. The beta () for Monthly share prices
VII. The beta () for Weekly share prices
VIII. References

Risk
The beta () of an investment is a measure of the risk arising from exposure to
general market movements.
Risks are classified broadly into 2 types:
Systematic risk - The risk that relates to macro economic factors.
Unsystematic risk - It is business related risk which can be reduced/eliminated
thought diversification.
Generally we calculate of 2 types, one for the Equity and other for the entire company.
Equity Beta measures the systematic business risk and financial risk of a company.
Asset Beta measures the systematic business risk only.

A beta above one generally means that the asset both is volatile and tends to move up and
down with the market. Negative betas are possible for investments that tend to go down
when the market goes up, and vice versa. There are few fundamental investments with
consistent and significant negative betas, but some derivatives like equity put options can
have large negative betas.
Beta is important because it measures the risk of an investment that cannot be
diversified away.

Statistical estimation
Beta is estimated by linear regression.
regression. Given an asset and a benchmark that we are
interested in, we want to find an approximate formula
formu

## A common expression for beta is

where Cov and Var are the covariance and variance operators.
o

## This can also be expressed as

where a,b
a,b is the correlation of the two returns, and a and b are the respective
volatilities.

## Ambuja Cements Ltd

Company Background
Ambuja Cements Limited, formerly known as Gujarat Ambuja Cement Limited, is a
major cement producing company in India. The Group's principal activity is to manufacture
and market cement and clinker for both domestic and export markets.
The company was founded by Narotam Sekhsaria in 1983 in partnership with Suresh
Neotia. Global cement major Holcim acquired management control of Ambuja in 2006. The
Company has also made strategic investments in ACC Limited.
The company has entered into a strategic partnership with Holcim, the second largest
cement manufacturer in the world from 2006. Holcim had, in January, bought a 14.8 per cent
promoters' stake in the GACL for INR 21.4 billion. Currently Holcim holds 50.17% of shares
in Ambuja Cements.

The shares of the company are traded publicly on the Bombay Stock Exchange
(BSE) and the National Stock Exchange (NSE). Following are the codes assigned to
Ambuja Cement Limited:
Codes

BSE:500425
NSE:AMBUJACEM
Bloomberg: ACEM:IN
Reuters: GACM.BO

Methodology
To calculate the equity risk for Ambuja Cements Ltd, we used the NSE prices of the
stock of the company and compared the same with NIFTY (Index of NSE).
The beta () of the stock has been estimated using share prices for last 5 years. We
have calculated beta separately for
1. Yearly share prices
2. Monthly share prices
3. Weekly share prices
While the share prices and NIFTY have been taken from Yahoo Finance, the
regression analysis has been performed on Microsoft Excel.

## The beta () for Yearly share prices

Yearly opening and closing prices of Equity shares of Ambuja Cement Ltd. was taken
and the return was calculated.
Similarly, yearly opening and closing NIFTY was taken and the return was calculated.
A regression analysis was performed, from which we received the following result.


 

  
  

 

  
 

  !"
#
\$% " 

&'

(" 
  
"  

* + 
-'\$ #


#



  



  





  #
#)
# 
)# 



 


 )
## )##

 
#
#)

 
,##
)



#
##


 !
,##
)

Here the highlighted value, that is the coefficient of Variable 1, represents the beta ().
So, calculated beta () = 0.715231
Whereas, as per NSE is 0.93.


 !
#
##

## The beta () for Monthly share prices

Monthly opening and closing prices of Equity shares of Ambuja Cement Ltd. was
taken and the return was calculated.
Similarly, monthly opening and closing NIFTY was taken and the return was
calculated.
A regression analysis was performed, from which we received the following result.


 

  
  

 
#
  
 
#
  !"
#
\$% " 

&'

(" 
  
"  


#

#

* + 
-'\$ #

  
##
  

  





) ) #
)#
## 
 



 


# #)
#) )

 

)#

 
,))
##




#


 !
,))
##

Here the highlighted value, that is the coefficient of Variable 1, represents the beta ().
So, calculated beta () = 0.474371
Whereas, as per NSE is 0.93.


 !

#

## The beta () for Weekly share prices

Weekly opening and closing prices of Equity shares of Ambuja Cement Ltd. was
taken and the return was calculated.
Similarly, weekly opening and closing NIFTY was taken and the return was
calculated.
A regression analysis was performed, from which we received the following result.



 

  
  
##
 

  
 
#
  !"
#
\$% " 
#
&'

(" 
  
"  


#
#
#

* + 
-'\$ #

  
#



  






  ##
 #
# 



 


 #
 ##

 



 
,
))




#


 !
,
))

Here the highlighted value, that is the coefficient of Variable 1, represents the beta ().
So, calculated beta () = 0.90333
Whereas, as per NSE is 0.93.
Therefore, we can see here that as we moved to the weekly data, we get a more
accurate result in line with that of NSE.


 !

#

References

1. http://www.topstockresearch.com/index/BetaValuesOfNIFTY_50Stocks1.html
2. https://in.finance.yahoo.com/q?s=AMBUJACEM.NS
3. http://economictimes.indiatimes.com/ambuja-cements-ltd/stocks/companyid-13643.cms
4. http://in.reuters.com/finance/stocks/overview?symbol=ABUJ.NS