Author: Gaurav Bawankule
Introduction: GlaxoSmithKline Pharmaceuticals Ltd (GSK Rx India) is a research-based pharmaceutical and healthcare company that was established in 1924. It is a subsidiary of GSK, one of the world’s largest research-based pharmaceutical companies. GSK has been a leader in medicines for asthma and chronic obstructive pulmonary disease (COPD) for 50 years. In 1969, it introduced the world’s first selective short-acting beta agonist (inhaled medication).
Objective: To find beta and its significance.
Views and reviews:
- Bhushan Akshikar, Managing Director, GlaxoSmithKline Pharmaceuticals Limited commented, “GSK remains focused on gaining share and defending leadership position of key brands for therapies in which we operate. With the launch of our global blockbuster Shingrix we expect to address an unmet preventive health need and gain momentum for our vaccines business.”
- Tobi Tunji said that the company (GSK) will exit Nigeria after 51 years of operations as foreign currency volatility undermines its business model.
Data Collection:
- Firstly, I visited the Yahoo Finance website.
- Then, I clicked on the Historical Data option under the Data and Reports section.
- I downloaded the data of GlaxoSmithKline Pharmaceuticals Ltd and Nifty 50 index from 01-Oct-2022 to 30-Sep-2023 in excel format.
- In the end, I sorted the data in excel for analysis.
Data Analysis:
The regression equation has the form:
Y = a + b*X
Where, Y is the dependent variable, X is the independent variable, a is the intercept, and b is the slope.
In our case, GlaxoSmithKline Pharmaceuticals Ltd is the dependent variable and Nifty 50 is the independent variable.
Intercept, a = 0.1892
Slope, b = 0.1999
So, the regression equation is given by-
Y (GlaxoSmithKline Pharmaceuticals Ltd) = 0.1892+ 0.1999* X (Nifty)
The above equation shows us the relationship between GlaxoSmithKline Pharmaceuticals Ltd and Nifty. The positive sign indicates that if Nifty rises then the price of GlaxoSmithKline Pharmaceuticals Ltd shares will also rise and vice-versa. If Nifty rises by 100 points, then GlaxoSmithKline Pharmaceuticals Ltd shares will rise by 19.99.
T-stat for b (Co-efficient of Nifty) is 0.7784 and the P-value is 0.4401 which means that the coefficient of Nifty is not significant at the 0.05 level, as the p-value is greater than 0.05. This implies that Nifty has no significant effect on GlaxoSmithKline Pharmaceuticals Ltd, and the relationship between them is weak or non-existent.
The number of observations is 49. R^2 is 0.012 which indicates that the model only explains 1.27 % of the variation in the price of GlaxoSmithKline Pharmaceuticals Ltd. This means that the model is not a good fit for the data, and there are other factors that affect the price of GlaxoSmithKline Pharmaceuticals Ltd more than the price of Nifty 50.
Conclusion:
Beta(β) for our Case is 0.199.
A beta of 0.199 for the above Nifty and GlaxoSmithKline Pharmaceuticals Ltd regression model indicates that the price of GlaxoSmithKline Pharmaceuticals Ltd is less volatile than the price of Nifty 50. It means that for every 1% change in the price of Nifty 50, the price of GlaxoSmithKline Pharmaceuticals Ltd changes by 0.199. It also means that GlaxoSmithKline Pharmaceuticals Ltd has a lower expected return than Nifty 50, so here beta is less than 1 then it is good for long term investment.
Reference:
https://www.theafricareport.com/318141/nigerian-industry-fears-gsk-pullout-may-trigger-mass-exit/