Introduction:
Larsen & Toubro Ltd, commonly known as L&T, is an Indian multinational conglomerate, with business interests in engineering, construction, manufacturing, technology and financial services, headquartered in Mumbai. The company is counted among world’s top five construction companies.
Objective:
To calculate β & find its significance
Data collection:
The data was gathered from a secondary source, the NSE’s official website. Data on the NSE’s daily closing stock price & Larsen & Toubro Ltd the data has been gathered. The data has been narrowed down to the weekend (Friday) closing price only.
Data Analysis:
Regression Statistics
Multiple R 0.918495
R Square 0.843633
Adjusted R Square 0.840158
Standard Error 80.57424
Observations 47
Interpretations:
Here, we can observe that the R square value is 0.843633, which means that 84% of weekly returns of Larsen & Toubro Ltd can be explained by Nifty. We can infer that to the given extent Larsen & Toubro Ltd does follow the Nifty trend.
ANOVA
df SS MS F Significance F
Regression 1 1576203 1576203 242.7838 9.47E-20
Residual 45 292149.4 6492.208
Total 46 1868352
Interpretations:
H0: Nifty is not influencing the weekly returns of Larsen & Toubro Ltd
H1: Nifty is influencing the weekly returns of Larsen & Toubro Ltd
Here as the F value is 242.7838 which is more than 4, thus we reject the null hypothesis & accept the alternate hypothesis, concluding that nifty is influencing the weekly returns of Larsen & Toubro Ltd.
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
Intercept -894.913 163.9466 -5.45856 1.97E-06 -1225.12 -564.707 -1225.12 -564.707
X Variable 1 0.15546 0.009977 15.58152 9.47E-20 0.135365 0.175555 0.135365 0.175555
Interpretations:
We can observe here that the Beta value is 0.175555 meaning that 1 unit change in Nifty leads to 0.175555 change in weekly returns of Larsen & Toubro Ltd. Also, the value of beta is positive indicating the presence of a positive relationship between the two variables. The P value is 9.47E-20 which is less than 0.05, thus the model is significant at 95% confidence interval.