Fundamentals and stock returns: the Indian stock market

Abstract

The purpose of this study is to explore the cross-sectional predictability of equity returns in India using fundamental variables. The sample includes companies listed at National Stock Exchange (NSE) from 2002 to 2004. We broadly follow the approach of Chan, Hamao, and Lakonishok (1991). Our findings reveal a significant relationship between expected returns and four variables – price-to-earnings ratio dividend yield, cash earnings yield and turnover.