A STUDY ON THE RELATIONSHIP BETWEEN THE CPSE ETF AND NIFTY CPSE AND THE VOLATILITY OF THE CPSE ETF

Abstract

The report titled “A study on the relationship between the CPSE ETF and NIFTY CPSE and the volatility of the CPSE ETF” is a report based on the case study carried out by me on the relationship between the CPSE ETF and NIFTY CPSE. It is a part of the course work of 4th semester, to be submitted as a requirement of the MBA program of Delhi School of Management, Delhi Technological University. The objectives of the report are to compare and analyse the correlation and variance between CPSE ETF and NIFTY CPSE and to study the volatility of the CPSE ETF over the course of four years and also as compared to its market price. This Report is divided into seven chapters. The first chapter of this study deals with introduction that presents the introduction to ETF and the description on their underlying index and how they are related to each other. It also talks about the volatility that drives the market. This chapter also introduces with the purpose and objective of the study. The second chapter of the report presents the literature review. This talk about the various studies that have been conducted in the past with respect to ETF and risks, return and volatility related to it. Few papers are based on the Indian scenario and helps in understanding the volatility of the ETF in the Indian market. It also talk about the history of the CPSE ETF and the purpose of its introduction in the Indian market. Literature also tells us about the various techniques to be followed in order to test the objectives of the study. The third chapter is about the research methodology and the data collection and techniques carried out for the analysis. The fourth chapter gives the test results and their analysis. Variance and correlation are calculated to analyse the relationship between CPSE ETF and NIFTY CPSE. Also, volatility of the CPSE ETF over the course of four years is calculated to test its performance in the market and the beta as compared to the market is calculated to analyse its volatility and riskiness. The fifth chapter summarizes the findings and also provides recommendations of the basis of the analysis carried out in the previous chapter. The sixth chapter is on bibliography. This report is winded up with seventh chapter on annexure that contains Excel workbook showing calculation of volatility. The variance and correlation calculated for CPSE ETF and NIFTY CPSE shows that the ETF and its underlying index are directly related to each other.