Market Capitalization Anomaly: Evidence from the Indian Stock Market
Keywords:
Market Capitalization, Treynor model, Modigliani risk-adjusted Model, Sharpe Model, Portfolio RiskAbstract
This research explores the daily effects of Market Capitalization anomalies from 2018 to 2022. Market capitalization, also known as "market cap", is the product of the current market price of one share and the total number of outstanding shares. The investment community uses market capitalization to determine the size of a company rather than relying on sales or total assets. The Market Capitalization effect is a phenomenon that has been studied by academics for a long time, even before the formulation of the CAPM. Various studies have attempted to determine whether it is accurate or a proxy for other factors. To investigate the Market Capitalization ratio anomaly in the Indian stock market, researchers divided the sample stocks into ten portfolios. The highest M/C stocks were included in Portfolio One, and the lowest M/C stocks were included in Portfolio Ten. For simplicity, each Portfolio contains almost 24 stocks. The Sharpe, Treynor, and Modigliani Risk-Adjusted Method (M2) were used to evaluate various portfolios. The study results show that the portfolio return increased with the mid-capitalization portfolio.
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