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Sectoral Robustness of Asset Pricing Models: Evidence from the Indian Capital Market

Author

Listed:
  • Mobin Anwar

    (Research Scholar, Department of Management, Central University of Rajasthan, Ajmer, India.)

  • Sanjay Kumar

    (Assistant Professor, Department of Management, Central University of Rajasthan, Ajmer, India.)

Abstract

In asset pricing literature, discussions are going around every corner of the world that the CAPM is dead or alive. Pragmatic evidences are supporting the three factor model proposed by Fama and French that it better captures the return of an underlying asset than the conventional CAPM in developed economies. Some literature in asset pricing is in favour of CAPM stating that it has become a basis for the development of other models. The present study is an attempt to find the applicability of CAPM, other one factor models, two factor models and the three factor model for various sectors in Indian context. The study covers a period of 1st April 2009 to 31st March 2016. In the study it has been found that the Fama and French three factor model better explains the returns for every sector. In financial sectors the CAPM and the Fama and French three factor model hold strongly than non-financial sectors. The two factor model with market premium and value premium is very close to three factor model as per the question of predicting returns is concerned. JEL Classification: G10, G12, G17

Suggested Citation

  • Mobin Anwar & Sanjay Kumar, 2018. "Sectoral Robustness of Asset Pricing Models: Evidence from the Indian Capital Market," Indian Journal of Commerce and Management Studies, Educational Research Multimedia & Publications,India, vol. 9(2), pages 42-50, May.
    • Handle: RePEc:aii:ijcmss:v:09:y:2018:i:2:p:42-50
    DOI: 10.18843/ijcms/v9i2/05
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    References listed on IDEAS

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    More about this item

    Keywords

    CAPM; Fama and French three factot model; size premium; value premium.;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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