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Equity Risk Premium in India: Comparative Estimates from Historical Returns, Dividend and Earnings Models

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  • Manju Tripathi
  • Smita Kashiramka
  • P. K. Jain

Abstract

The article compares efficiencies of dividend and earnings growth models with historical model in predicting the unconditional expected equity risk premium (ERP) in addition to analysing the impact of recession. The exercise is undertaken employing two different Indian capital market indices, NIFTY500 and SENSEX. The study period is 20 years (1997–2016) with pre- and post-recession periods as 2001–2008 and 2009–2016, respectively. The dividend growth model emerges as the most efficient model for predicting ERP while highlighting that Indian firms follow stable dividend policy. NIFTY500 index with a wider base proves to be a superior benchmark for market returns over SENSEX comprising 30 blue-chip firms.

Suggested Citation

  • Manju Tripathi & Smita Kashiramka & P. K. Jain, 2018. "Equity Risk Premium in India: Comparative Estimates from Historical Returns, Dividend and Earnings Models," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 17(1_suppl), pages 136-156, April.
    • Handle: RePEc:sae:emffin:v:17:y:2018:i:1_suppl:p:s136-s156
    DOI: 10.1177/0972652717751543
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    References listed on IDEAS

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