Return & Risk Computation

For:
Abbott India
 Estimation of α,β, and R^2
• Month and closing prices for the stock, BSE
Sensex and BSE 500 indices were collected for a
period of 3 years ending on 30 September 2010.
• There were no corporate actions like stock split
and bonus during this period
• Thus there was no need to adjust the prices of
the stock
• Monthly logarithmic returns were computed for
the stock, and both the indices.
 1. Estimation of α,β, and R^2
Vs. BSE Sensex Returns Vs. BSE-500 Returns

Alpha
.51 .57
Beta
.40 .37
R-Square
0.14 .15
Standard Error
0.25 0.22
Range of Beta with 95%
CL 0.59-1.60 0.59-1.49
 2. Computation of Annualized Exp Returns
Vs. BSE Sensex Returns Vs. BSE-500 Returns

Historical
Method 12.48
CAPM
11.16 10.62
Market Model
12.46 12.39
Premium for
Total Risk
16.33 14.35
Premium for
Business Risk and
Financial Risk 11.21
 3. Decomposition of Total Risk(Variance)
Stock Vs. BSE Sensex Vs. BSE-500 Returns
Returns

Total Risk
83.59
Systematic
Risk
11.83 12.32
Unsystematic
Risk
71.76 71.27
Total Risk
83.59 83.59
 4. Computation of TSR and HPR
FY CG DY TSR HPR

2000-01 -22.10 0.00 -22.10 -22.10

2001-02 2.77 0.00 2.77 -10.74
2002-03 -11.72 0.00 -11.72 -10.97
2003-04 85.43 0.00 85.43 7.49
2004-05 21.90 0.00 21.90 11.32
2005-06 -2.29 2.65 0.36 8.98
2006-07 -20.45 2.70 -17.75 4.28
2007-08 2.50 3.41 5.91 3.97
2008-09 -25.23 2.67 -22.56 0.19
2009-10 122.52 4.28 126.80 8.68