Asset-pricing models: A case of Indian capital market

Khurshid Khudoykulov and David McMillan

Cogent Economics & Finance, 2020, vol. 8, issue 1, 1832732

Abstract: The asset-pricing models have been a fundamental area of research in finance due to its applicability in corporate finance and stock analysis. The present research attempted to evaluate the three popular asset-pricing models namely the capital asset-pricing model, the Fama-French three-factor model, and the Fama-French five-factor model in the Indian equity market for the period of January 2009 to November 2018. The study also tested the role of the size, profitability, value, investment, and market factors in explaining the average equity returns at the Indian bourses. The empirical results indicate the inferior performance of single market factor in describing the variations in average stock returns in comparison of the FF3FM and FF5FM. Furthermore, the size and value factors added to CAPM yields a vital improvement in explaining the variation in average returns of sample stocks.

Date: 2020
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DOI: 10.1080/23322039.2020.1832732

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