Determinants of Equity Share Prices in India: A Panel Data Approach
AbstractThe present study examines the fundamental determinants of share price in India. The study employs panel data consisting of annual time series data over the period 2006-2011 and cross-section data pertaining to 6 major sectors of the Indian economy, namely, Heavy and Manufacturing, Pharmaceutical, Energy, IT and ITES, Infrastructure and Banking. The panel data techniques, viz. Fixed Effects model and Random Effects model have been employed to investigate the objective. The empirical results reveal that the dividend per share has a negative and significant impact on the share price of manufacturing, pharmaceutical, energy and infrastructure sectors. These results are consistent with findings of Zahir and Khanna (1982), Malhotra (1987) and Sharma (2011), that dividend has influenced market price of share significantly in negative direction. The evidences show that earning per share and price-earnings ratio are being the crucial determinants of share prices of manufacturing, pharmaceutical sector, energy, infrastructure and commercial banking sectors. The findings indicate that size is being a significant factor in determining the share prices of all sectors under consideration except manufacturing. Moreover, the book value per share positively influences the share prices of pharmaceutical, energy, IT & ITES and Infrastructure. The present study confirms that performance of the fundamental ratios of the industry will be essential and immense helpful to investors and analysts in assessing the better stocks that belong to different industry groups.
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Bibliographic InfoArticle provided by Department of International Business and Economics from the Academy of Economic Studies Bucharest in its journal Romanian Economic Journal.
Volume (Year): 15 (2012)
Issue (Month): 45 (December)
Fixed Effects Model; Random Effects Model; Fundamental Determinants; Equity Share Prices.;
Find related papers by JEL classification:
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Diane Scott Docking & Paul D. Koch, 2005. "Sensitivity Of Investor Reaction To Market Direction And Volatility: Dividend Change Announcements," Journal of Financial Research, Southern Finance Association & Southwestern Finance Association, vol. 28(1), pages 21-40.
- Chaudhary Mohammad Irfan & Mohammed Nishat, 2002. "Key Fundamental Factors and Long-run Price Changes in an Emerging Market-A Case Study of Karachi Stock Exchange (KSE)," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 41(4), pages 517-533.
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