Title: Revisiting the asset pricing paradigm using sustainable growth rate

Authors: Lalit Arora; Shailendra Kumar; Piyush Verma

Addresses: L.M. Thapar School of Management, Thapar Institute of Engineering and Technology (Deemed to be University), H. Number 1224, Urban Estate, Phase-1, Jalandhar – 144022, Punjab, India ' Indian Institute of Information Technology, Room No. 3217, Lecture Complex, Deoghat, Jhalwa, Allahabad – 211012, Uttar Pradesh, India ' L.M. Thapar School of Management, Thapar Institute of Engineering and Technology (Deemed to be University), Dera Bassi Campus, Dera Bassi-Barwala Road, District Mohali – 140507, Punjab, India

Abstract: The last few decades have evidenced growing literature on asset pricing in building perceptive thinking of managers and researchers. Given this justification, the present study aims to examine the ability of a future oriented growth measure of firms in the form of sustainable growth rate in explaining their stock returns. A panel dataset of firms spanning across nine industries from the Indian manufacturing sector has been used. Results of vector autoregressive distributed lag model reveal that sustainable growth of the firms is adequately priced. The findings have been integrated with the asset growth effect. Theoretical and practical implications are discussed.

Keywords: sustainable growth rate; asset growth; asset pricing; panel VAR model; manufacturing; India.

DOI: 10.1504/IJEBR.2018.093371

International Journal of Economics and Business Research, 2018 Vol.16 No.1, pp.46 - 62

Received: 23 Feb 2017
Accepted: 29 Apr 2017
Published online: 25 Jul 2018 *

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