• Bhumiswor Sharma CHRIST (Deemed to be University), Bangalore
  • Srikanth Pyati CHRIST (Deemed to be University), Bangalore




R&D premium, asset pricing, cross-sectional models, portfolio management, healthcare industry


The economic advantages of research and development (R&D) investment have shown conflicting results in empirical studies. This study aimed to examine a different approach, evaluating R&D premium and cross-sectional variability of equity returns, a particular case for the Indian healthcare industry. The primary motivation for this study arrived from the size of the healthcare industry, the world's third-largest and India's largest industry, and the investment made in R&D activities. Results demonstrated that India's annualized R&D premium was significantly greater than the current value, investment, profitability, and momentum premiums. It indicated that the new R&D risk factor in pricing models is a primary reference for Indian equity investors, particularly for companies with R&D spending. Results were robust in evaluating portfolio return using univariate and multivariate tests. Findings suggested that R&D augmented models outperformed conventional pricing models, denoting that the R&D factor undoubtedly revealed priced element and vital risk factor in designing pricing models for emerging countries like India. When adjusting to R&D investment and trading strategies, policymakers, and financial professionals should hereby evaluate their risk-return implications

Author Biography

Srikanth Pyati, CHRIST (Deemed to be University), Bangalore

Dr Srikanth P (srikanth.p@christuniversity.in) is an Associate professor of finance at the School of Business and Management, CHRIST (Deemed to be University) Bangalore. He has teaching experience of more than 17 years in the area of corporate finance and investment. He has contributed several research articles in national and international level journals and conferences. His areas of interest include corporate finance, behavioral finance, capital market and asset pricing.


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