Tests of the Fama Model in India

Gregory Connor and Sanjay Sehgal

FMG Discussion Papers from Financial Markets Group

Abstract: This study empirically examines the Fama-French three-factor model of stock returns for India. We find evidence for pervasive market, size and book-to-market factors in India stock returns. We find that cross-section means returns are explained by exposures to these three factors, and not by the market factor alone. We find mixed evidence for parallel market, size and book-to-market factors in earnings, we do not find any reliable link between the common risk factors in earnings and those in stock returns. The empirical results, as a whole, are reasonably consistent with the Fama-French three-factor model.

Date: 2001-05
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