Title: Calculation of Beta of Ashok Leyland Limited and its significance
Author: Abhinaya Shankar
Introduction: Ashok Leyland Ltd (Ashok Leyland), a subsidiary of Hinduja Automotive Ltd, is an integrated automobile company. It offers heavy and medium commercial vehicles and related components, light commercial vehicles, and power solution systems. The company also offers financial services mainly relating to vehicle and housing financing. It serves customers across Africa, the Middle East, Asia, CIS, and Latin America. Ashok Leyland is headquartered in Chennai, Tamil Nadu, India.
Objective: To calculate Beta of Ashok Leyland limited and its significance.
Data Collection: Data of Ashok Leyland Limited from 01-12-2021 to 30-11-2022 from NSE website
• Friday weekly closing prices has been found out
• Weekly Return have been calculated with the formula of (Y2-Y1)/Y1*100
• Weekly Return of Equity have been regressed on Weekly Return of Nifty
Data Analysis:
Weekly return of Ashok Leyland= -0.195+1.070 Weekly return of nifty +E
• t-stat = 4.655
• R2 = 0.315
• F = 21.669
• N = 49
• The above equation tells us the relationship between Weekly Return of Ashok Leyland Ltd and Weekly Return of Nifty. The positive sign means that there is a direct relationship. If nifty rises, equity rises and if nifty falls, equity falls. The co-efficient of weekly return of nifty is 1.070, which means if nifty rises by 1 unit, Ashok Leyland Ltd equity will rise by 1.070 units and vice versa.
• Number of Observations are 49 and t-stat is 4.655.
• P value is 0, which is less than 0.05, means that b is statistically significant at 5%. Even it is less than 0.01, b is statistically significant at 1% level.
• R2 is 0.315, which means that 31.5% of Y (Ashok Leyland) is explained by X (nifty), balance of 68.5% is error. Error is due to the variables which are not in the model.
• F is 21.669, the P value for which is 0 < 0.01, means overall the model is statistically significant.
Conclusion:
Since b = 1.070 is greater than 1, it is statistically significant.
Ashok Leyland Ltd. is a good option for investment because for every increase in nifty there will an increase in the equity of Ashok Leyland.
.