Research & development premium in the Indian equity market: An empirical study
- Title
- Research & development premium in the Indian equity market: An empirical study
- Creator
- Sharma B.; Srikanth P.
- Description
- This article aims to investigate the research and development (R&D) premium and explore the three most prominent asset pricing models: capital asset pricing and the three-and five-factor models (Fama & French, 1993; 2015). The results show that India's annualized average R&D premium is significantly higher than the existing value, market, profitability, size and investment premiums, implying that the R&D premium is a more significant concern for Indian investors, particularly for high R&D firms. It was also observed that by applying the GRS test and the Fama and MacBeth (1973) two-pass procedure, the R&D risk factor augmented the CAPM, FF3F and FF5F models outperforming the existing CAPM, FF3F and FF5F models, respectively. We can also report that R&D is, unquestionably, a priced ingredient and a critical factor in developing pricing models for developing markets such as India. The paper's conclusions add to the current literature in R&D and asset pricing and assist investment professionals in developing better investment and trading strategies. 2021 AESS Publications. All Rights Reserved.
- Source
- Asian Economic and Financial Review, Vol-11, No. 10, pp. 816-828.
- Date
- 2021-01-01
- Publisher
- Asian Economic and Social Society
- Subject
- Asset pricing; Investment; Portfolio management; Profitability; R&D premium; Size; Value premium
- Coverage
- Sharma B., Christ University, Kengeri Campus, Mysore Road, Bangalore, India; Srikanth P., Christ University, Kengeri Campus, Mysore Road, Bangalore, India
- Rights
- All Open Access; Gold Open Access
- Relation
- ISSN: 23052147
- Format
- Online
- Language
- English
- Type
- Article
Collection
Citation
Sharma B.; Srikanth P., “Research & development premium in the Indian equity market: An empirical study,” CHRIST (Deemed To Be University) Institutional Repository, accessed February 25, 2025, https://archives.christuniversity.in/items/show/15994.