Cross-sectional Return Predictability in Indian Stock Market: An Empirical Investigation

44 Pages Posted: 5 May 2021

See all articles by Gautam Goswami

Gautam Goswami

Fordham University - Finance Area

Date Written: May 3, 2021

Abstract

This paper provides a comprehensive analysis of stock return predictability in the Indian stock market by employing both the portfolio and cross-sectional regressions methods using the data from January 1994 and ending in December 2018. We find strong predictive power of size, cash-flow-to-price ratio, momentum and short-term-reversal, and in some cases of book-to-market-ratio, price-earnings-ratio. The total volatility, idiosyncratic volatility, and beta are not consistent stock return predictors in the Indian stock market. In cross-sectional regression analysis, size, short-term reversal, momentum, and cash-flow-to-price ratio predict the future stock returns. Overall, the two variables momentum and cash flow to price ratio demonstrate reliable forecasting power under all methods and both small and large size samples.

Keywords: Indian Stock Market, Cross-sectional analysis, returns, behavioral finance

JEL Classification: C58, E44, G11, G12, G15

Suggested Citation

Goswami, Gautam, Cross-sectional Return Predictability in Indian Stock Market: An Empirical Investigation (May 3, 2021). Available at SSRN: https://ssrn.com/abstract=3838938 or http://dx.doi.org/10.2139/ssrn.3838938

Gautam Goswami (Contact Author)

Fordham University - Finance Area ( email )

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