Research & Development Premium in the Indian Equity Market: An Empirical Study

Asian Economic and Financial Review

article

Bhumiswor Sharma¹  Srikanth P¹ 

[1] Christ University, Mysore Road, Kengeri Campus

关键词: Asset pricing;    R&D premium;    Size;    Value premium;    Profitability;    Investment;    Portfolio management.;   

DOI  :  10.18488/journal.aefr.2021.1110.816.828

学科分类：社会科学、人文和艺术（综合）

来源: Asian Economic and Social Society

【 摘 要 】

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.

【 授权许可】

CC BY