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Chaudhary, Pankaj
- Testing of Three Factor Fama-French Model for Indian and US Stock Market
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Authors
Affiliations
1 Shri Ram College of Commerce, University of Delhi, Delhi, IN
1 Shri Ram College of Commerce, University of Delhi, Delhi, IN
Source
Journal of Commerce and Accounting Research, Vol 6, No 2 (2017), Pagination: 1-8Abstract
The asset pricing modeling has attracted the attention of researchers and practitioners alike. The studies on asset pricing in initial years responded positively to the CAPM (Fama & Macbeth, 1973). However later studies by Stattman (1980), Banz (1981), Basu (1983), Bhandari (1988), and various other researchers found some anomalies such as size effect, leverage, value effect etc. which were not explained by CAPM. The Fama-French model (1993) is believed to capture these anomalies. We conduct the test of CAPM and three factor Fama-French model along with its variants for Indian and US capital markets. The results of our test find that though CAPM is able to capture the cross section of average returns both in India and US, still the three factor model with size and value factor can do the job better and hence is useful in pricing the financial assets of both developed and developing countries.Keywords
CAPM, Fama-French Model, Asset Pricing.
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- Do Institutional Investors Non-linearly Affect the Capital Structure of Firms: Evidence from India
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Authors
Affiliations
1 Assistant Professor, Department of Finance and Business Economics, University of Delhi, Delhi, New Delhi, IN
1 Assistant Professor, Department of Finance and Business Economics, University of Delhi, Delhi, New Delhi, IN
Source
Journal of Commerce and Accounting Research, Vol 10, No 3 (2021), Pagination: 52-63Abstract
Our study examines the non-linear relationship between institutional investors and capital structure of the Indian firms, to understand its applicability in an emerging economy. We find the applicability of a quadratic relationship between leverage and institutional ownership. We notice that at a lower level of institutional ownership, the relationship is negative, because it initially reduces the debt level of the firms; however, as ownership increases, it is more lucrative to increase the leverage in order to magnify the gains. We also classify the institutional investors into two categories – pressure sensitive and pressure insensitive investors. The behaviour of pressure-sensitive investors and pressure-insensitive investors are different from each other. The behaviour of pressure-insensitive investors is similar to aggregate institutional investors, whereas we found contrasting behaviour for pressure-sensitive investors in our study. Investors should understand that simply having more proportion of institutional investors in a firm’s equity is not going to resolve agency conflicts. It is the presence of pressure-insensitive investors that will help mitigate the agency.Keywords
Agency Problems, Leverage, Institutional Investors, Pressure-sensitive Investors, Pressure-insensitive InvestorsReferences
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