South Asian Journal of Management

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Industry Dynamics in Stock Returns:Evidence from Indian Equity Market


Affiliations
1 Department of Commerce and Management Studies, Government College, Thrissur, Kerala, India
2 Department of Applied Economics, Cochin University of Science and Technology, Kerala, India
     

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This paper attempts to look for further evidence on the relation between industry specific variables and stock returns by using Indian data for the period 2002-2010. Unlike other researches in the area, the study used industry level data on five sectors namely: Energy, FMCG, Information Technology, Pharmaceuticals and Automobiles. Data availability and diverging business cycle sensitivity constitute the rationale behind the selection of industry groupings. Empirical methodology involves a multi-factor modeling using step-wise regression procedure. Max R-based Regression methodology identifies capital intensity, liquidity conditions and share of export earnings are the prime industry variables affecting stock returns. Results also indicate that stock returns of different sectors behave differently under same economic conditions which confirm the potentials of industry allocation for the diversification of investment risks.
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  • Industry Dynamics in Stock Returns:Evidence from Indian Equity Market

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Authors

T. G. Saji
Department of Commerce and Management Studies, Government College, Thrissur, Kerala, India
S. Harikumar
Department of Applied Economics, Cochin University of Science and Technology, Kerala, India

Abstract


This paper attempts to look for further evidence on the relation between industry specific variables and stock returns by using Indian data for the period 2002-2010. Unlike other researches in the area, the study used industry level data on five sectors namely: Energy, FMCG, Information Technology, Pharmaceuticals and Automobiles. Data availability and diverging business cycle sensitivity constitute the rationale behind the selection of industry groupings. Empirical methodology involves a multi-factor modeling using step-wise regression procedure. Max R-based Regression methodology identifies capital intensity, liquidity conditions and share of export earnings are the prime industry variables affecting stock returns. Results also indicate that stock returns of different sectors behave differently under same economic conditions which confirm the potentials of industry allocation for the diversification of investment risks.