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Business Statistics Project 2010
Business Statistics Project 2010
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1
Comparative Analysis of Variation in BSE Sensex
1. Summary:
1.1. Topic:
Comparative Analysis of Variation in BSE Sensex with respect to its Top 10 Listed
Companies, NASDAQ & Nikkei and Gold.
1.2. Objective:
Our objective is to find out how the BSE Sensex varies according to variation in its top 10
listed companies (according to market capitalization). We will also find out whether there is
any similarity in the variation of SENSEX and the price of GOLD.
Moreover we will also find out , how the percentage change in SENSEX is dependent on that
of NASDAQ and Nikki.
1.3. Methodology:
First we have collected data from BSE, NASDAQ, Nikkei, and Yahoo Finance. Then we have
used Regression Analysis using Microsoft Excel2007.
1.4. Result:
From the Regression Analysis we have got the result that variation in BSE Sensex doesn’t
depend much on NASDAQ & Nikkei or Gold, but its variation is highly dependent upon the
variation of its top 10 listed companies.
2. Introduction:
Our objective is to find out the amount of dependence SENSEX has on its top 15 companies
in terms of market capitalization. We will also find out whether there is any similarity in the
variation of SENSEX and the price of GOLD. Moreover we will also find out , how the
percentage change in SENSEX is dependent on that of Nasdaq and Nikki.
2.1. SENSEX:
Bombay stock exchange or BSE is the largest stock exchange in India in terms of number of
listed companies in the exchange and the market capitalization of the listed companies. The
prime index of the Bombay Stock Exchange is the BSE 30 that is popularly known as the
Sensex. The Sensex is made with highly liquid stocks of 30 largest companies in terms of
market capitalization. The Sensex was first constructed in the 1986 on 1st of January with
just 30 stocks. Over the years of course these stocks have changed time and again
according to the condition of the market and economy of the country. The selection of the
stocks is made on the basis of market capitalization and liquidity of stocks. The BSE index
committee decides on which stock to include in the Sensex and which stock should be
removed from the Sensex. This committee is made up of highly placed experts and
professionals from the field finance and industry that are well aware of the Indian stock
market scenario.
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Comparative Analysis of Variation in BSE Sensex
2.2. NASDAQ:
The NASDAQ Stock Market, also known as the NASDAQ, is an American stock exchange.
"NASDAQ" originally stood for "National Association of Securities Dealers Automated
Quotations," but the exchange's official stance is that the acronym is obsolete. ] It is the
largest electronic screen-based equity securities trading market in the United States and
fourth largest by market capitalization in the world. With approximately 3,700 companies
and corporations, it has more trading volume than any other stock exchange in the world.
It was founded in 1971 by the National Association of Securities Dealers (NASD), who
divested themselves of it in a series of sales in 2000 and 2001. It is owned and operated by
the NASDAQ OMX Group, the stock of which was listed on its own stock exchange beginning
July 2, 2002, under the ticker symbol NASDAQ: NDAQ. It is regulated by the Securities and
Exchange Commission.
The Nikkei 225 began to be calculated on September 7, 1950, retroactively calculated back
to May 16, 1949.Currently, the index is updated every 15 seconds during trading
sessions.The Nikkei 225 Futures, introduced at Singapore Exchange (SGX) in 1986, the
Osaka Securities Exchange (OSE) in 1988, Chicago Mercantile Exchange (CME) in 1990, is
now an internationally recognized futures index.
The Nikkei average hit its all-time high on December 29, 1989, during the peak of the
Japanese asset price bubble, when it reached an intra-day high of 38,957.44 before closing
at 38,915.87. Its high for the 21st century stands just above 18,300 points. In January
2010, it was 72.9% below its peak.
2.4. GOLD:
Gold has been widely used throughout the world as a vehicle for monetary exchange, either
by issuance and recognition of gold coins or other bare metal quantities, or through gold-
convertible paper instruments by establishing gold standards in which the total value of
issued money is represented in a store of gold reserves.
However, the amount of gold in the world is finite and production has not grown in relation
to the world's economies. Today, gold mining output is declining.With the sharp growth of
economies in the 20th century, and increasing foreign exchange, the world's gold reserves
and their trading market have become a small fraction of all markets and fixed exchange
rates of currencies to gold were no longer sustained
Many holders of gold store it in form of bullion coins or bars as a hedge against inflation or
other economic disruptions. However, some economists do not believe gold serves as a
hedge against inflation or currency depreciation.
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Comparative Analysis of Variation in BSE Sensex
3. Literature Review:
ABSTRACT
The paper attempts to understand the inter-linkages and causal relationship between the
Nasdaq composite index in US, the Nikkei in Japan with that of NSE Nifty and BSE Sensex in
India during the period of January, 1999 to August, 2004, using daily closing data. The
Johansen co-integration test is applied to measure the long-term relationship between two
indices and Granger-causality test is used to check the short- term causal relationship.The
analysis reveals that there is no long-term relationship of the Indian equity market with that
of the US and Japanese equity markets. Further, Nasdaq and Nikkei have stronger causal
relationship in the period 1999-2001 which becomes either very weak or disappears in the
period 2002-2004. There seems to be disassociation in the movements of the Nasdaq and
Nikkei with that of the Sensex and Nifty. When the stock markets have no tendency to
move together in the long-term and causal effects become weak in the short-term then the
markets are segmented and provide ample room for diversification of investments. The
recent surge of FIIs investments to the Indian equity market is primarily a reflection of this
trend.
Introduction
The main objective of this paper is to investigate the issue of stock market integration in
India in the light of financial liberalization. Following the global trend financial liberalization
has also started in India since 1992. Increasing globalisation of the world economy should
obviously have an impact on the behaviour of domestic stock markets (Cerny 2004). Since
the work of Grubel (1968) on expounding the benefits from international portfolio
diversification, the relationship among national stock markets has been widely studied.
Hence the relationship among different stock markets has great influence on investment
because diversification theory assumes that prices of different stock markets do not move
together so that investors could buy shares in foreign as well as domestic markets and seek
to reduce risk through global diversification. Under this backdrop, it is worth examining
whether Indian stock market has really integrated with the world markets. The study finds
that in the short run, while US, UK and Hong Kong stock markets Granger cause the Indian
stock markets, the Indian stock does not Granger cause the above markets which appears
to be plausible. However, the study finds that the Indian stock market (BSE Sensex) is not
co-integrated with the developed markets and hence not sensitive to the dynamics in these
markets in the long run.
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Comparative Analysis of Variation in BSE Sensex
Conclusion
India is one of the emerging economies, which have witnessed significant development in
the stock markets during the recent periods due to the liberalization policy initiated by the
government. It is generally believed that due to liberalization policy and the consequent
development of Indian stock markets, the latter might have integrated with the developed
markets. One may argue that due to this integration, which appears to have taken place
after liberalization, Indian stock market will mainly be governed by a common factor as in
the case of the developed markets. However, our study does not support this view. Rather,
it finds that Indian stock market is not at all integrated with the world markets. Of course,
the study finds that baring Japan there is a unidirectional causality from the developed
market. Hence we may conclude that Indian stock market is not influenced by other
markets. Of course, some short-term sentiment in the world market does have impact but
this is short-lived. That means the pr-requisites, which are required for long-run relationship
has not been achieved by India so far.
Men, it has been well said think in herds; it will be seen that they go mad in herds, while
they only recover their senses slowly, and one by one.
THE WORLD markets catch cold when the US market sneezes. The recent reaction of the
world markets to the steep fall in Nasdaq is a case in point. The 357-point (9.70 per cent)
drop in Nasdaq on April 14 resulted in the Bombay Stock Exchange Sensex losing 291 points
on April 17.
The impact is not limited to the Indian market. Most South-East Asian markets too felt the
shock-waves of the Nasdaq crash. On April 17, when the market reopened after the
weekend, Japan's Nikkei lost 1,426 points (6.98 per cent), Hong Kong's Hang Seng index
1,380 points (8.54 per cent) and Singapore's STI index 190 points (8.68 per cent). The
European markets too reacted adversely to the Nasdaq fall.
In the same way, the recovery on Nasdaq on April 17 and 18 reversed the trends in most
South-East Asian and European markets (except India) the next day. In India, the impact of
the Nasdaq crash seems far from over as the Sensex lost a further 135 points on Tuesday
and 79.66 points on Wednesday. A similar contagion effect was observed when the Dow
Jones index crashed in October 1997.
However, the contagion effect has become more pronounced in recent years because of the
rapid global economic integration. It may also be observed that the phenomenon of global
stock market contagion always comes for debate only when a major crisis hits the US
market.
In this context, it is interesting to look at the nature of the long-term relationship between
the US and markets around the world. Empirical analysis abroad has shown that the
average correlation between the US and other foreign markets (the UK, France, Germany,
Switzerland, Japan and East-Asian markets) between 1958 to 1995 was around 0.40. It is
possible that the correlation would have gone up over the last five years. Yet, it is not high
enough to say that the global markets are fully inter-connected.
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Comparative Analysis of Variation in BSE Sensex
The relationship between the markets was studied since January 1999 till date. The period
is relevant in the sense that both Infosys Technologies (March 1999) and Satyam Infoway
(October 1999) got listed on Nasdaq. Though the extent of correlation between Nasdaq and
the Sensex rose subsequent to the listing of these stocks, the movement between the
indices have been quite close during March-April 1999. Again since August 1999, the
correlation between the two indices has been quite high (see graph).
Apart from accounting for the listing of Infosys Technologies and Satyam Infoway, the
period of high correlation also coincided with periods of high volatility both the in the US and
the Indian markets (see Business Line, April 9, 2000 for a story about increase in volatility).
A similar analysis of the Infosys Technologies stock both at Nasdaq and in the Indian market
conforms the above trend.
The Infosys Technologies stock was not only as volatile as the Sensex, its correlation with
the US stock was also found to be high during these periods of high volatility. However, the
correlation between the US and the Indian stock of Infosys Technologies was not as strong
as between the Nasdaq index and the Sensex. This means that in times of high volatility,
the Sensex was reacting more to the Nasdaq movement as a whole than that of the Infosys
Technologies stock alone.
One implication of this result is that it could undermine the logic behind international
portfolio diversification. If the benefits of diversification are not available when it is needed
most, there would seem to be little point in diversification, in the first place.
It is equally interesting to know the driving force behind the financial contagion. To some
extent the integration of the global economies has a role to play. Arbitrage activity in
commodity and security markets along with the dynamics of the currency market are
important forces behind international propagation of crisis.
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Comparative Analysis of Variation in BSE Sensex
When the Sensex shoots up, gold prices come down and the rupee appreciates against the
US dollar. Can you please explain the correlation among these three?
Well, the Indian stock market is dominated by foreign institutional investors (FIIs). When
they pour in dollars into India, they get converted into rupees which find their way into the
stock market. And the dollar finds its way into the currency market thus augmenting its
supply.
When the supply of dollars increases, naturally its value vis-À-vis the rupee comes down.
This is the immediate and direct explanation. A distant explanation could be that when the
sentiments improve on the back of a Sensex upswing heralding a better state of the
economy, the rupee appreciates.
As for gold prices, the simple logic is hardcore and big-ticket investors invest in many
markets, including shares and gold. Obviously, when the share market sentiments improve,
they shift some of their investments from gold to shares so as to be able to meet their
payment commitments that would stare in their face two days later. Yes, there is a positive
correlation between Sensex and the rupee and a negative correlation between the Sensex
and gold.
After moving on predictable lines for several years, gold, oil and stocks have seen their
three-way relationship go awry in the recent months.
In the recently halted market rally, the Sensex shot up by 21 per cent (November 20, 2008
to January 6, 2009) even as global stock markets stabilised on the back of ‘stimulus’
packages and rate cuts. Normally, this would have been a cue for gold prices to cool off.
Instead, gold prices actually rose by 13 per cent in this period.
Variant behavior:
Crude oil, from November 20 actually plunged 11 per cent, taking the opposite direction to
gold prices. These trends are at variance with the historic movements in gold prices.
Traditionally, prices of gold have moved hand in hand with crude oil, as gold is considered
an inflation hedge. Similarly, gold has usually risen when stocks have performed badly; as
gold is viewed as a substitute for risky assets like stocks.
Gold prices have usually firmed up in the midst of severe stock market corrections. Take for
example September 2001 (9/11), when markets worldwide experienced turmoil. While the
Sensex tumbled by over 12 per cent for the month, gold posted a gain of over 6 per cent.
Or take the case of May 17, 2004 when the Sensex registered its biggest ever single day fall
of 11.4 per cent; prices of gold went up by 1.7 per cent from $373 to $380 an ounce that
day.
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Comparative Analysis of Variation in BSE Sensex
All this suggests that investors looking to switch between stocks and gold to capitalise on
their relative returns may have to rework their equations quite a bit.
Sensex, Nifty dance to the tune of global forces — Correlation with emerging
markets
Suresh Krishnamurthy
FOR those of you who lost money last week, it may be of some consolation to know that
your experience was not unique. You could almost say that stock meltdowns, like inflation
and corruption, are global in sweep.
Fund flows from institutional investors have ensured that markets move in a synchronised
fashion. They make sure your woes are shared by that elsewhere. By the same token, you
too are hostage to what happens outside.
For instance, in the period since April 30, markets in Taiwan and Korea have lost as much
as the Indian markets. Political uncertainty has sparked a meltdown in prices even in these
countries. The Sensex and the Nifty have been swaying not only to the proximate domestic
causes but also to the pull of global forces, for some years now. The correlation has existed
since 1996 and has increased in the period since 2001.
The relationship between Sensex and such indices can be measured by calculating the
correlation between Morgan Stanley Capital International (MSCI) and Sensex. MSCI's index
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Comparative Analysis of Variation in BSE Sensex
is the benchmark for emerging global market funds. In the period since end-1996, just
more than 50 per cent of the monthly return generated by Sensex is explained by the
changes in Morgan Stanley Capital International's Emerging Market Index. In the period
since April 2001, the explanatory power of the emerging market index has risen to 66 per
cent. The correlation of MSCI with BSE 200 is also high, as it is with the monthly returns of
the net asset values of schemes such as Franklin India Bluechip, Templeton India Growth
and HDFC Equity.
On whether the correlation would rise in future, their opinions were, however, divided. Mr
Bagga said the correlation would keep increasing since rising trade would integrate the
Indian economy with the rest of the world. Mr Prasad, however, contented that if large
domestic funds emerged to counterbalance the effect of FIIs, then correlation would decline.
August 21: The 100-points plus rally witnessed on Thursday failed to sustain. On Friday,
except the pharmaceutical and software stocks, most of the specified stocks have lost a
major part of gain recorded on Thursday. On Friday, the sensex lost 67 points and closed at
2922 points.
The termination of Thursday's rally has put the market in a fix. With Thursday's rally, the
sensex had broken the short-term falling trendline. It was certainly a good sign. But Friday's
move has somehow reduced this optimism. In fact, in monthly chart, the sensex has broken
the 9-year upward trendline. This breach, without any doubt is negative for the health of
the sensex.
From the present level, the sensex is certainly targeting the December 1996 level of 2713
points which is around 200 points away from the current level.
Although the chances of touching 2713 level are high, the movement in ITC stock would be
crucial for the market. In fact, ITC is the only stock which can trigger a rally in the near
future. Reliance also August 21: The 100-points plus rally witnessed on Thursday failed to
sustain. On Friday, except the pharmaceutical and software stocks, most of the specified
stocks have lost a major part of gain recorded on Thursday. On Friday, the sensex lost 67
points and closed at 2922 points.
The termination of Thursday's rally has put the market in a fix. With Thursday's rally, the
sensex had broken the short-term falling trendline. It was certainly a good sign. But Friday's
move has somehow reduced this optimism. In fact, in monthly chart, the sensex has broken
the 9-year upward trendline. This breach, without any doubt is negative for the health of
the sensex.
From the present level, the sensex is certainly targeting the December 1996 level of 2713
points which is around 200 points away from the current level.
Although the chances of touching 2713 level are high, the movement in ITC stock would be
crucial for the market. In fact, ITC is the only stock which can trigger a rally in the near
future. Reliance alsoenjoys a strong support of a 9-year old upward trendline at the level of
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Comparative Analysis of Variation in BSE Sensex
around Rs 102. Other heavy weightage stocks like Bajaj Auto and Bhel are also better
placed.
While the position of the heaviest stock (contributing 20 per cent to the sensex), HLL
appears extremely weak in weekly chart, the position of daily chart is marginally better.
Overall, the short-term outlook of HLL is grim. The position of State Bank is equally weak
and hints at further decline. As such, the move in ITC and Reliance would decide the fate of
a rally in the coming week.
While the market is around 200-points away from a major support level, some specified
stocks offer an excellent opportunity for the long term investors. Traders however can stick
to wait and watch policy for the time being. For investors, Bhel, Godrej Soaps, Indo Gulf
Fertilisers, Reliance, Siemens, Thermax, Exide Industries, Carrier Aircon and ABB offer a
good investment opportunity. However, there are stocks which are expected to remain weak
in the comingdays. Cadbury, which recorded smart gains in the past few weeks is due for a
correction. Profit booking should be considered on this counter.
Similarly, Cochin Refineries has also turned weak. Unlike other refinery stocks, Cochin
Refineries had outperformed the market in the past few weeks. However, with a sharp dip
on Friday, the stock has given a fresh exit signal. An exit should be made at the current
level as the stock is expected to fall further. The position of other stocks like Hindalco,
Colgate, Grasim and ACC is equally weak.
Sensational headlines such as “Sensex in free fall”, “Bloodbath on D-Street” and “Market
faces mayhem” would have surely stirred up a storm in your teacup as you read the
morning newspaper in recent weeks. But should you worry that with the Sensex down in the
dumps, your equity investments too will take a similar hit? Not always.
While there is no doubt that the Sensex stocks are the most liquid (most traded) and well-
known ones, one should not forget that it is, at the end of the day, just a basket of 30
stocks. This means the so-called market barometer gives you a picture of only large stocks
from about 12 sectors.
The market value of a company is determined by multiplying the number of equity shares
that it has issued by their market price. This market value is further multiplied by the free-
float factor to determine the free-float market value.
To use a live example, the market value of Tata Consultancy Services (TCS) is Rs 103,351
crore since it has 97.86 crore shares having a value of Rs 1,056 (on August 17). Taking into
consideration only those shares that are available for trading in the market. In our example,
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Comparative Analysis of Variation in BSE Sensex
TCS might have a total of 97.86 crore shares but in reality only 19.57 crore shares are
available as the rest are treated as ‘controlling/strategic holdings’. This pegs the free-float
factor of TCS at 0.20 (19.57/97.86) and free-float market value at Rs 20,670.20 crore.
So, if you add up the current free-float market values of all the 30 companies, you will get
the numerator for the Sensex formula. The Sensex is calculated using a methodology that
focuses upon the base period. Since this base period of Sensex is taken as 1978-79 and the
base value as 100 index points — what the index divisor does is to adjust the original base
period of the Sensex to its present level. This keeps the Sensex comparable over time.
Calculate Sensex on your own: Find out the free-float market capitalisation of all
the 30 companies that make up the Sensex.
Then, add all them. Make all this relative to the Sensex base. For example, for a free-float
market capitalisation of Rs 9,00,000 crore, if the Sensex value is 14,500 — then, for a free-
float market capitalisation of Rs 9,50,000 crore, the Sensex value will be 15,306. Just use
ratios and proportions learnt in junior school!
As the Sensex consists of 30 different companies, all of them have different share prices,
free-float adjustment factors, free-float market value and weightage in the index. Just like
the grandfather in a joint family, the company that enjoys most weightage in the Sensex is
Reliance Industries (RIL). Out of the 100 per cent weight of the Sensex, RIL currently has a
13.18 per cent weight.
With the top five companies, in terms of weightage, occupying nearly 50 per cent index —
any movements in these five in the same direction could move nearly half of the Sensex!
The accompanying table shows how the index value at any point reflects the ups and downs
of the 30 constituents. On August 20, the index gained 286.03 points as five stocks pulled it
down while the rest pushed it up.
Importance of weightage:
In the chart, HDFC Bank has an index weight of 3.17 per cent — which is less than half of
L&T (6.36 per cent). This is why a comparatively higher Rs 56 increase in share price has
effectively contributed to 22.7 index points for HDFC Bank. On the other hand, L&T, which is
two times heavier, has pitched in with 19.1 points with just a relatively lower gain of Rs 49.
So if you happen to have investments in the other sectors, broader indices such as BSE 200
or even BSE 500 could be better benchmarks, as can the BSE sectoral indices. Even the
most skilled investors assume that when the Sensex tanks by 400 points in a day, the whole
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Comparative Analysis of Variation in BSE Sensex
stock market reacts…and that all stocks are affected in the same way. Truth be told, the
Sensex captures the movement of 30 stocks, against the 7,000 or so listed companies in
India. If the Sensex is down, your investments in a particular company’s shares can actually
be unaffected.
4. Research Gap:
4.1. Positives
The current market is an indication of a vast collection of uncountable global and domestic
cues. The analyses explained above in the literature review contain a fairly thorough study
of wide varieties of such factors.
4.2. Negatives
Though the analyses extensively cover a wide variety of factors in order to explain the
movement of Sensex, it lacks objectivity. The conclusions/inferences are subjective and
have less use of analytical tools which does not give a clear picture about the dependency of
the factors on movement of Sensex Indices.
5. Objectives:
Our objective is to find out how the BSE Sensex varies according to variation in its
top 10 listed companies (according to market capitalization).
To find out whether there is any similarity in the variation of SENSEX and the price of
GOLD.
To find out, how the percentage change in SENSEX is dependent on that of NASDAQ
and Nikkei.
6. Hypothesis:
We have made three assumptions here:
1. BSE Sensex varies according to NASDAQ & Nikkei.
2. BSE Sensex varies according to top 10 listed companies.
3. BSE Sensex varies inversely to the price of Gold.
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Comparative Analysis of Variation in BSE Sensex
7. Methodology:
Regression analysis is widely used for prediction and forecasting, where its use has
substantial overlap with the field of machine learning. Regression analysis is also used to
understand which among the independent variables are related to the dependent variable,
and to explore the forms of these relationships. In restricted circumstances, regression
analysis can be used to infer causal relationships between the independent and dependent
variables.
Tools Used
Microsoft Excel 2007
Assumption
1. The populations follow normal distribution.
2. The populations are independent.
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Comparative Analysis of Variation in BSE Sensex
8. Data Analysis:
Overall equation would be:
The above result shows that variation in BSE index is highly dependent upon variations of
its 10 major shares.
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Comparative Analysis of Variation in BSE Sensex
R Square: This is the most important number of the output. R Square tells how well the
regression line approximates the real data. This number tells you how much of the
output variable’s variance is explained by the input variables’ variance. Here R2 = 0.88.
Adjusted R Square: This is quoted most often when explaining the accuracy of the
regression equation. Adjusted R Square is more conservative the R Square because it is
always less than R Square. Another reason that Adjusted R Square is quoted more often
is that when new input variables are added to the Regression analysis, Adjusted R
Square increases only when the new input variable makes the Regression equation more
accurate (improves the Regression equations’ ability to predict the output). R Square
always goes up when a new variable is added, whether or not the new input variable
improves the Regression equation’s accuracy. Adjusted R2 = 0.871 means that 87.1% of
the variation of BSE around its mean is explained by the regressors (top 10 companies).
Standard Error: The standard error here refers to the estimated standard deviation of
the error term u. It is sometimes called the standard error of the regression. It is not to
be confused with the standard error of y itself or with the standard errors of the
regression coefficients given below.
df SS MS F Significance F
Regression 10 0.013459114 0.001345911 96.94813643 8.5407E-56
Residual 132 0.001832529 1.38828E-05
Total 142 0.015291644
Significance of F: This indicates the probability that the Regression output could have
been obtained by chance. A small Significance of F confirms the validity of the
Regression output. For example, if Significance of F = 8.5407E-56, there is only
8.5407E-54 % chance that the Regression output was merely a chance occurrence. In
this case it is almost zero.
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Comparative Analysis of Variation in BSE Sensex
The regression output of most interest is the following table of coefficients and associated
output:
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 90.0% Upper 90.0%
Intercept -0.000135078 0.000317461 -0.425494878 0.671168857 -0.000763047 0.000492891 -0.000660945 0.000390789
RIL 0.117662433 0.020994147 5.604534972 1.16836E-07 0.076133935 0.159190931 0.082886063 0.152438803
ONGC 0.069490297 0.021038086 3.303071308 0.001230869 0.027874885 0.111105709 0.034641144 0.104339449
SBI 0.149307239 0.026566969 5.620032777 1.08687E-07 0.096755148 0.20185933 0.105299605 0.193314873
TCS 0.05761936 0.028625688 2.012855034 0.046163983 0.000994921 0.114243799 0.010201501 0.105037219
NTPC 0.065782683 0.034615542 1.90038001 0.059563972 -0.002690278 0.134255645 0.008442756 0.12312261
Infosys 0.166616347 0.034629308 4.811425852 4.03061E-06 0.098116154 0.23511654 0.109253616 0.223979078
BHEL 0.166305861 0.03038016 5.474160087 2.13689E-07 0.106210902 0.22640082 0.115981755 0.216629967
Bharti Airtel 0.049933532 0.014443289 3.457213396 0.000734897 0.021363279 0.078503785 0.026008523 0.073858541
ITC 0.107791553 0.024548975 4.390877963 2.29397E-05 0.059231255 0.156351851 0.067126685 0.148456421
L&T 0.102230324 0.025236674 4.050863604 8.65757E-05 0.052309689 0.152150959 0.060426297 0.144034351
Coefficients: In simple or multiple linear regression, the size of the coefficient for each
independent variable gives you the size of the effect that variable is having on your
dependent variable, and the sign on the coefficient (positive or negative) gives you the
direction of the effect. In regression with a single independent variable, the coefficient
tells you how much the dependent variable is expected to increase (if the coefficient is
positive) or decrease (if the coefficient is negative) when that independent variable
increases by one. In regression with multiple independent variables, the coefficient tells
you how much the dependent variable is expected to increase when that independent
variable increases by one, holding all the other independent variables constant.
Remember to keep in mind the units which your variables are measured in.
Standard Error: The standard error is an estimate of the standard deviation of the
coefficient, the amount it varies across cases. It can be thought of as a measure of the
precision with which the regression coefficient is measured. If a coefficient is large
compared to its standard error, then it is probably different from 0.
P-value: The P-Values of each of these provide the likelihood that they are real results
and did not occur by chance. The lower the P-Value, the higher the likelihood that that
coefficient or Y-Intercept is valid. For example, a P-Value of 1.16836E-07 (in the case of
RIL) for a regression coefficient indicates that there is only 0.00001168% chance that
the result occurred only as a result of chance.
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Comparative Analysis of Variation in BSE Sensex
The above result shows that variation in BSE index is not dependent upon the variation in
NASDAQ & Nikkei indexes. Though, it’s the common perception that the BSE index varies
according to the variation in the NASDAQ & Nikkei indexes, but our results shows that the
perception is not true.
Adjusted R2 = 0.1918 means that 19.18% of the variation of BSE around its mean is
explained by the regressors (NASDAQ & Nikkei). Which is very low.
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Comparative Analysis of Variation in BSE Sensex
df SS MS F Significance F
Regression 2 0.002802168 0.001401084 16.43010658 4.45374E-07
Residual 128 0.010915252 8.52754E-05
Total 130 0.01371742
F = 4.45374E-07 means there is only 0.000045% chance that the Regression output
was merely a chance occurrence. In this case it is almost zero.
The regression output of most interest is the following table of coefficients and associated
output:
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 90.0% Upper 90.0%
P-Value of 0.889074281 (in the case of NASDAQ) for a regression coefficient indicates
that there is only 88.9% chance that the result occurred only as a result of chance.
However in the case of Nikkei it’s 0.0000108%.
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Comparative Analysis of Variation in BSE Sensex
The above result shows that variation in BSE index is not dependent upon the variation in
Gold. But the result is showing that there is some inverse relationship between the variation
in BSE index and that in Gold price. It’s the common perception that the price of gold
increases when the market is going down and our result confirms that, but our result
explains only 2.06% of the variation.
Adjusted R2 = 0.0206 means that 2.06% of the variation of BSE around its mean is
explained by the regressors (Gold). Which is very low.
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Comparative Analysis of Variation in BSE Sensex
df SS MS F Significance F
Regression 1 0.000420639 0.000420639 3.98830269 0.047741886
Residual 141 0.014871005 0.000105468
Total 142 0.015291644
F = 0.047741886 means there is only 4.77% chance that the Regression output was
merely a chance occurrence.
The regression output of most interest is the following table of coefficients and associated
output:
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 90.0% Upper 90.0%
P-Value of 0.047741886 (in the case of Gold) for a regression coefficient indicates that
there is only 4.77% chance that the result occurred only as a result of chance.
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Comparative Analysis of Variation in BSE Sensex
9. Policy Implications:
N/A
10. Conclusion:
From the Regression Analysis we have got the result that variation in BSE Sensex doesn’t
depend much on NASDAQ & Nikkei or Gold, but its variation is highly dependent upon the
variation of its top 10 listed companies.
11. Recommendation:
As we have seen from the result that the variation in BSE Sensex is more dependent on the
top 10 companies. However the common perception is that it varies according to the
variation in NASDAQ and Nikkei. So based on our project report we would suggest the
common trader to trade into the share market by seeing the result of top 10 companies like
RIL, ONGC, TCS, Infosys rather than watching the Index of NASDAQ and Nikkei.
12. Bibliography:
References
http://www.bseindia.com/
http://www.nasdaq.com/
http://e.nikkei.com/e/fr/marketlive.aspx
http://in.finance.yahoo.com
http://www.mcxindia.com
http://www.wikipedia.org/
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