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Is There A Beta Anomaly? Evidence From The India

Author

Listed:
  • VINAY KHANDELWAL

    (Jaipuria Institute of Management Jaipur, 01, Bambala Institutional Area, Pratap Nagar, Sanganer, Jaipur 302033, Rajasthan, India)

  • VARUN CHOTIA

    (Jaipuria Institute of Management Jaipur, 01, Bambala Institutional Area, Pratap Nagar, Sanganer, Jaipur 302033, Rajasthan, India)

Abstract

This paper investigates the Indian equity market for the presence of a beta anomaly. A beta anomaly occurs when the additional market risk taken by an investor is not rewarded. Academic literature shows mixed evidence on whether the market rewards risk-takers or not for the additional risk taken. Using a sample of monthly returns of 265 companies during a period of 240 months from January 2000 to December 2019, the authors test the Indian equity market for the presence of an anomaly. A decile descriptive analysis shows a positive relationship between market risk and returns, and a negative relationship between company-specific risk and returns. A two-stage Fama–MacBeth (FMB) regression procedure is employed to empirically test for the relationship between beta and expected returns. The findings refute the presence of a beta anomaly in the Indian capital market. Also, the study concludes that a linear model of slope-intercept form is enough to explain the beta and expected returns’ relationship. The findings benefit investment managers and wealth advisors by explaining the market risk and expected returns relationship.

Suggested Citation

  • Vinay Khandelwal & Varun Chotia, 2022. "Is There A Beta Anomaly? Evidence From The India," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 17(04), pages 1-20, December.
    • Handle: RePEc:wsi:afexxx:v:17:y:2022:i:04:n:s2010495222500208
    DOI: 10.1142/S2010495222500208
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