Firm Attributes, Corporate Fundamentals and Investment Strategies: An Empirical Study for Indian Stock Market

Tarunika Jain Agrawal, Sanjay Sehgal and Vibhuti Vasishth

Management and Labour Studies, 2020, vol. 45, issue 3, 366-387

Abstract: We combine corporate attributes and fundamental factors for evolving different investment strategies using data from 200 companies listed in the National Stock Exchange (NSE) from 2005 to 2018. The results indicate the existence of equity market anomalies based on size, volume, earnings, cash flow variability, asset growth, price momentum, price-to-book ratio and profitability. The performance of trading strategies is sensitive to portfolio construction procedure, that is, forming 5/10/20 portfolios. Bivariate strategies generally perform better than univariate strategies in the Indian context. On an overall basis, the size-based strategy performs best with a mean excess return of 3.63 per cent per month. We further find that corporate fundamentals such as profitability, operating efficiency, liquidity, solvency, innovation and entry barriers help in filtering poor future performers that may have been recommended by attributes-based strategy. Our filtered portfolios based on firm attributes and corporate fundamentals outperform unfiltered portfolios, and their returns are not explained by multi-factor performance benchmarks.

Keywords: CAPM; Fama–French Model; trading strategies; equity anomalies; accounting fundamentals (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:sae:manlab:v:45:y:2020:i:3:p:366-387

DOI: 10.1177/0258042X20927995

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