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.

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This article examines whether the literature promised value effect exists and the changing nature of value premium at the industry level. It also determines the value premium’s strength by controlling the January effect within and across the regulated industry groups. This is done by utilizing the two most prominent pricing models: Fama–French three- and five-factor, considering all listed firms trading at BSE India between 1999 and 2020. The results show that a significant value effect exists in 15 of the 17 regulated industry groups over 21.5 years, while sub-period analysis revealed variation in the value effect at industry-based portfolio returns. We developed quintile and multivariate portfolios within and across the industries. Results show that the industry-specific value premium has been relatively low in the current decade due to decreasing industry portfolio returns and increasing P/B ratios within industry groups. The study also used the GRS test to explore the explanatory power of models. Results indicated that the explanatory power of models has declined in post-crisis periods. While controlling the January effect, the value premium has slightly diminished within and across the industry groups in the recent decade. We also observed that investors who seek to allocate assets within and across industries are likely to have potentially predictable and pretty stable returns. While other countries have found industry-specific value premiums, no such study has been conducted in India. As a first attempt, these findings are relevant for investors and academia.