Value effect in Indian stock market: an empirical analysis

Tripathi, Vanita; Aggarwal, Priti

doi:10.1504/ijpspm.2018.090735

Cited by 5 publications

(4 citation statements)

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“…Pandey and Sehgal (2016) have examined size anomaly through its rationale sources. Tripathy and Aggarwal (2018) have confirmed the presence of value anomaly in Indian markets. Balakrishnan (2016) confirms the presence of size, value and momentum anomaly testing them through the FF3 model.…”

Section: Literature Reviewsupporting

confidence: 63%

“…Our contribution to the literature is to provide an out-of-sample study for an emerging market, that is, India to test if the major equity market anomalies exist in India and also to examine their persistence using prominent asset pricing models. Though, in India, several studies have tested these anomalies (Agarwalla et al, 2013; Balakrishnan et al, 2018; Pandey & Sehgal, 2016; Tripathy & Aggarwal, 2018), profitability and investment anomalies have found limited attention in the existing literature for India. Therefore, we conduct this study to provide evidence on the presence of prominent equity anomalies for India.…”

Section: Introductionmentioning

confidence: 99%

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Equity Market Anomalies, VIX and Asset Pricing: Trading Strategies for India

Pandey

2019

The Indian Economic Journal

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In this article we examine five prominent equity anomalies, viz., size, value, profitability, investment and momentum for Indian capital market using data from July 2001 to June 2019. We test the sample anomalies through four prominent factor models and find that all the factor anomalies remain significant for India, however, size and value anomaly provide substantial risk adjusted returns to be exploited by portfolio managers. We further evaluate if the anomalies tend to reverse under different macro-economic uncertainty, which is proxied by VIX. We find barring Size effect none of the anomaly reverses under different macro-economic conditions. We further observe that Fama French three factor model subsumes the majority of the alpha effect, however, none of the factor models fully explain the alphas of sample anomalies. Finally, we find that few of the sample anomalies are countercyclical in nature and thus, provide time diversification opportunity. Profitability-size anomaly provides risk adjusted time diversification opportunity. Our results have significant implications for portfolio managers, policy makers and academia.

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Section: Literature Reviewsupporting

confidence: 63%

Section: Introductionmentioning

confidence: 99%

Equity Market Anomalies, VIX and Asset Pricing: Trading Strategies for India

Pandey

2019

The Indian Economic Journal

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“…Yet another attempt was made by Sehgal and Tripathi (2007) who confirmed the presence of value effect in Indian stock using a sample of 482 companies of BSE-500 equity index for the period 1990–2003. In the latest study by Tripathi and Aggarwal (2018), the value effect is found to be persisting for the Indian stock market from March 1999 to June 2015.…”

Section: Introductionmentioning

confidence: 95%

Is value premium sector-specific? Evidence from India

Tripathi

Aggarwal

2020

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PurposeThis paper is an attempt to explore the fact that whether the literature-promised value premium has any sector orientation. The paper tests the relationship between the value premium and Indian sectors: fast-moving consumer goods (FMCG), financials, healthcare, information technology (IT), manufacturing and miscellaneous.Design/methodology/approachThe paper analyses around 210–480 companies listed on BSE-500 for the period of the recent 18 years ranging from March 1999 to March 2017. The paper employed Welch's ANOVA to examine whether the price-to-book market ratio is significantly different across sectors. Two prominent asset pricing models – single factor market model and Fama–French three-factor model – were used to examine the existence of value premium within sectors for full period and two sub-periods.FindingsThe empirical results of the paper suggest that the difference in the P/B ratio both between sectors and within sectors is statistically significant. The results further suggest that the value premium exists within the sectors irrespective of their value-growth orientation.Research limitations/implicationsThe paper is not free from certain limitations. Firstly, due to the non-availability of data in the public domain, the time period before 1999 could not be considered. Secondly, the study has used data pertaining to the Indian stock market only. To add to it, our study has concentrated on BSE-500 companies only; however, the future researchers can include both NSE and BSE companies.Practical implicationsThe paper has important implications for portfolio managers and retail investors following a top-down approach of investing. The portfolio manager can strategically build up the portfolios to concentrate more on the companies belonging to sectors like healthcare, manufacturing and FMCG. Investors following the top-down approach should avoid the underperforming growth stocks belonging to the growth sectors and allocate their funds to value stocks in the growth sector.Originality/valueThe paper is first of its kind to study the relationship between the value premium and Indian sectors. The paper contributes to portfolio management and asset pricing literature for an emerging market.

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“…There are however, gaps in literature owing to selection of variables and methodology adopted. Tripathi & Aggarwal (2020) maintain that universal applicability of any stock market phenomenon demands its investigation in both the developed and developing capital markets of the world. This is because capital markets differ from each other in terms of numerous aspects such as institutional structures and cultural backgrounds.…”

Section: Introductionmentioning

confidence: 99%

Value Risk Premium and Stock Returns in Kenya: Exploring the Moderating Effect of Investor Sentiment

Mugenda

Olweny

Wepukhulu

2021

JAFEE

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Purpose:Prior literature has focused on the direct effect of firm level fundamental characteristics on stock returns while ignoring the likely effect of investor irrationality on asset pricing decisions. The purpose of this study is to investigate the role of investor sentiment in the relationship between value risk premium and stock returns in Kenya. Design/methodology/approach: The study utilized monthly time series data for 60 companies listed at the NSE over the recent 9 years from 2011-2019. The study employed time series regression using ARDL and VEC estimation techniques to examine whether the effect of value risk on stock returns will vary with level of investor sentiment. Findings: Results show weak evidence for existence of value risk premium at the NSE using the main effects model. The pricing effect of value risk premium is however enhanced in the interaction model. The interaction though not significant implying that there is no moderating effect of sentiment. Research limitations: The shorter nine-year period considered by the study could be a source of small sample bias in the estimation. Sample periods for studies in mature markets span for over decades. In this light, making comparison of the findings in this thesis with those of other related studies may not be feasible. Originality/Value: This study is first of its kind to analyze the moderating effect of investor behavior on asset pricing for an emerging market. The paper contributes to portfolio management and asset pricing literature for emerging markets.

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Value effect in Indian stock market: an empirical analysis

Cited by 5 publications

References 0 publications

Equity Market Anomalies, VIX and Asset Pricing: Trading Strategies for India

Equity Market Anomalies, VIX and Asset Pricing: Trading Strategies for India

Is value premium sector-specific? Evidence from India

Value Risk Premium and Stock Returns in Kenya: Exploring the Moderating Effect of Investor Sentiment

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