Open AccessValidation of Asset Pricing Models with respect to Indian Capital Markets as a Developing Economy
Author(s) -
Sinjini De Sarkar
Publication year - 2022
Publication title -
indian scientific journal of research in engineering and management
Language(s) - English
Resource type - Journals
ISSN - 2582-3930
DOI - 10.55041/ijsrem11631
Subject(s) - capital asset pricing model , consumption based capital asset pricing model , economics , financial economics , portfolio , capital asset , investment theory , developing country , capital market , asset (computer security) , arbitrage pricing theory , finance , computer security , computer science , economic growth
The following research study focuses on the Indian capital market as a wider scope of developing economies. We understand the functioning of capital markets in general as well as the structure of the same in the Indian economy. We will look into differences between developing and developed economies. The paper makes a deeper analysis of whether the Capital Asset Pricing Model stands true for the Indian Capital Market over a duration of 10 years’ data. Similarly a hypothetical portfolio was created to assess the validity of the Fama- French model. We also give an analysis of how the market capitalisation to GDP ratio could give any kind of insight to whether the CAPM model gets replicated in that country’s capital market. The paper concludes with a real view analysis beyond the theory of the asset pricing models and verdict on a model which gives better results in the case of a developing economysuch as India. Key words: Asset Pricing Model, CAPM, Fama-French model, Buffett Indicator, Developing economies, Developed economies.