Title: A closer look at industry-associated value premium: evidence from India

Authors: Bhumiswor Sharma; P. Srikanth; Mareena Mathew

Addresses: School of Business and Management Finance, Christ University, Kengeri Campus, Mysore Road, Bangalore – 560029, Karnataka, India ' School of Business and Management Finance, Christ University, Kengeri Campus, Mysore Road, Bangalore – 560029, Karnataka, India ' Christ University, Hosur Road, Bangalore – 560029, Karnataka, India

Abstract: This paper examines whether the academic literature-promised value premium has any industry association in the Indian equity market and the relationship between stock returns, value, and size within and across industries. We examine all listed firms trading at BSE India between 1999-2020, using CAPM and Fama-French three-factor models on each firm-levels and industry-level portfolio. The positive and significant value effect was found to exist in 17 out of 21 industry groups. Both industry and firm-level value effects are identified; however, the firm-level effect seems more prominent. Furthermore, the value effect is most substantial in small-cap value stocks of value- and growth-oriented industries, large-cap value stocks of value-oriented industry groups, then small-cap growth stocks of value- and growth-oriented industries and large-cap growth stocks of value- and growth-oriented industries. We also show evidence confirming the claim that value premium results from investors challenging higher returns from firms and industries operating in higher risk and distressing constraints.

Keywords: value premium; firm size; regulated industry groups; risk measures; portfolio management; financial market; CAPM; Fama-French three-factor model; value effect; stock returns; India.

DOI: 10.1504/GBER.2022.125752

Global Business and Economics Review, 2022 Vol.27 No.3, pp.352 - 392

Received: 07 Jul 2021
Accepted: 20 Nov 2021
Published online: 27 Sep 2022 *

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