Relationship Between Industry-Associated Value Premium and Firm Risk Charaterstics on Stock Returns : Evidence From Indian Stock Market
- Title
- Relationship Between Industry-Associated Value Premium and Firm Risk Charaterstics on Stock Returns : Evidence From Indian Stock Market
- Creator
- Bhumiswor, Sharma
- Contributor
- P,Srikanth
- Description
- The body of academic literature consistently debates that firms with low PB (price to book) outperform firms with high PB characteristics. This study examines whether the academic literature-promised value premium has any industry association in the Indian equity market and tests the existence of other anomalies: size, investment, profitability, and R&D, in explaining the cross-sectional variability of stock returns. The study considers all BSE-listed firms actively trading between 1999-2021, using time-series, multivariate, and cross-sectional models on each industry-level portfolio. Results indicated that a significant value premium exists in 18 out of 21 industry groups. Both industry and firm-level value premiums are identified; however, the firm-level premium seems more prominent. The value premium is most substantial in small-cap value stocks of value-and-growth-oriented industries, large-cap value stocks of value-oriented industry groups, then small-cap growth stocks of value-and growth-oriented industries and large-cap growth stocks of value- and growth-oriented industries. Interestingly, the sub-period analysis revealed variation in the value premium, indicating that the industry-associated value premium has been relatively low in the current decade. It is due to decreasing tendencies in industry returns and increasing PB in industries. The study explores R&D premium and compares existing factor premiums. Results showed that India's annualized average R&D premium is significantly higher than the current value, profitability, size, and investment premiums, particularly for highly R&D intensive firms. To check the robustness of the findings, the study used the multivariate GRS (Gibbons Ross Shanken) test and the regression models. It confirmed that size and value premiums are the most prominent determinants of industry-level equity returns. The profitability and investment premiums also influence industries' returns. Investors who seek to allocate assets within and across industries are likely to have predictable and stable returns.
- Source
- Author's Submission
- Date
- 2024-01-01
- Publisher
- Christ(Deemed to be University)
- Subject
- Management Studies
- Rights
- Open Access
- Relation
- 61000304
- Format
- Language
- English
- Type
- PhD
- Identifier
- http://hdl.handle.net/10603/545559
Collection
Citation
Bhumiswor, Sharma, “Relationship Between Industry-Associated Value Premium and Firm Risk Charaterstics on Stock Returns : Evidence From Indian Stock Market,” CHRIST (Deemed To Be University) Institutional Repository, accessed February 23, 2025, https://archives.christuniversity.in/items/show/12350.