Title: Performance, persistence and explanation of value premium: evidence from Indian stock market

Authors: Vanita Tripathi; Priti Aggarwal

Addresses: Department of Commerce, Delhi School of Economics, New Delhi, India ' Department of Commerce, Delhi School of Economics, New Delhi, India; Delhi School of Business, Vivekananda Institute of Professional Studies – Technical Campus, New Delhi, India

Abstract: This paper comprehensively examines the performance and persistence of value effect in the Indian stock market over the 18-year period from March 1999 to March 2017. Using six valuation measures for five holding periods and three sub-periods, we found that value strategy is present in Indian stock market and is persistent during different sub-periods. Further, the paper attempts to uncover the factors that explain value-based returns. In this paper, we inspected alternative sources of value effect recommended by the literature. The empirical results suggest that majority of the value premium is explained by the firm's size, value, liquidity, information asymmetry and institutional ownership factors. The study, therefore, confirms that rational sources explain the value effect in the Indian stock market. The study has important implications for market efficiency, regulators, retail investors and portfolio managers.

Keywords: value effect; value investing strategy; capital asset pricing model; CAPM; Fama-French three factor model.

DOI: 10.1504/AAJFA.2021.120448

Afro-Asian Journal of Finance and Accounting, 2021 Vol.11 No.6, pp.808 - 833

Received: 19 Mar 2020
Accepted: 29 Jul 2020
Published online: 21 Jan 2022 *

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