A Comparison of CAPM, French and Fama Model Returns with Market Return of Indian FMCG sector

Ramanuj Sarda, Nilesh Poddaturi, Pawan Kumar Avadhanam


This paper is aimed at developing Capital Asset Pricing Model and French and Fama three factor model for the FMCG sector in India. CAPM uses market sensitivity Beta to describe the variation of stock returns whereas F&F model uses Size of the firm, Book to market equity and risk premium to explain the variation in returns. The models are developed for nine companies in the sector during the period 2007 to 2012 (yearly) and results are compared with the actual returns. It is found that the three factor model gives better results that are closer to the actual returns than those obtained by CAPM in most cases.

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ISSN : 2251-1547