Beta Estimation in Indian Stock Markets - Some Issues

  • Mihir Dash School of Business, Alliance University


This study examines the reliability of the OLS beta estimates in Indian stock markets by considering the residual characteristics of the market model regressions. The statistics used include the coefficient of determination (R2), the F-test for significance of the regression coefficient, the Durbin-Watson test for serial autocorrelation, the residual autocorrelation function, the Kolmogorov-Smirnov and Shapiro-Wilk tests for normality of the residuals, the presence of outliers, and White’s test for heteroskedasticity.

The results of the study indicate some serious issues afflicting beta estimation in Indian stock markets, including: non-normality of stock returns and of residuals, extreme standardized residual values, heteroskedasticity, residual autocorrelation, and low R2. Thus, the simple market model is likely to result in biased estimates for beta in Indian stock markets.

Author Biography

Mihir Dash, School of Business, Alliance University

professor, Quantitative Methods

Allaince University, Bangalore

Research Articles