| Pub. Date | : Jul, 2019 |
|---|---|
| Product Name | : The IUP Journal of Management Research |
| Product Type | : Article |
| Product Code | : IJMR11907 |
| Author Name | : Mobin Anwar and Sanjay Kumar |
| Availability | : YES |
| Subject/Domain | : Management |
| Download Format | : PDF Format |
| No. of Pages | : 18 |
The volatile behavior of price of capital assets is always interesting for different stakeholders of capital markets. It is fluctuation in the price of the asset which is responsible for the capital gain or loss of the investor. What a sensible investor wants, is a model that will predict the rise and fall of price of securities up to a greater degree. A significant milestone in the journey of prediction of price of securities was Capital Asset Pricing Model (CAPM) in 1964. After CAPM, there was a flood-like situation in the literature of asset pricing models. Fama and French (1993) proposed three-factor model, which is an extension of the conventional CAPM. The present study is an attempt to detect the presence of monotonic models in Indian capital market. The study deals with the period from April 1, 2009 to March 31, 2016. The study confirms that the two-factor model with value premium as extended variable is better than the prolonged CAPM and the superiority of Fama and French three-factor model in Indian stock market. The study also confirms the wellbeing of CAPM.
The first step in the area of risk reduction was taken by Harry Markowitz in 1950. He stated, “Don’t put all your eggs in one basket.” So, he advised investors to invest their savings in a diversified way because the loss from one security will be compensated by the gain from the other. Based on diversified way of investment, the first milestone in the literature of asset pricing model was given by Sharpe (1964). He proposed one-factor model and claimed that excess return to market portfolio is the predictor of security asset return.