Title: Factor premiums: Evidence from the Indian equity market

Author (s):: Al A.; Mahendra A.

Journal: Finance India

Month and Year: December 2020

Abstract: This paper empirically evaluates a six-factor asset pricing model in the Indian equity market. The study intends to highlight the existing factor premiums along with the relative performance of the prominent multi-factor asset pricing models. Employing portfolio methodology (Fama & French, 1993; 2015), the study examines a balanced crosssectional data belonging to the 646 Indian listed firms for a duration from July 2002 to March 2018. Further, the study documents the presence of strong size, market, and profitability premiums in the average returns. While the value, momentum, and investment factors are found redundant in the Indian equity market. Albeit, the GRS test rejects all the different compositions of tested models connoting that no model is competent to explain the returns absolutely. However, the study recommends a nested composition of profitability factor (RMW), market factor (Rm-Rf), size factor (SMB), and the value factor (HML), for a better cross-sectional explanation in the Indian equity market. © Indian Institute of Finance.

Document Type: Article

DOI: https://doi.org/