A Multi-factor risk model for the Indian Stock Market
نویسندگان
چکیده
The paper attempts to find the evidence of a multi factor model for explaining stock price returns in the Indian stock market. It makes use of the technique of statistical factor analysis. The results of the factor analysis show that a five factor model is appropriate for explaining the returns generation process in India. The explanatory power of this five factor model is significantly better for the five factor model, with an average R2 of 0.871, as compared to an R2 of 0.503 for the single index model. Further, the multi factor is significantly better than the single index model in explaining returns of small stocks.
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