Financial Markets and Investment Strategies
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Abstract
Abstract
This study examines the relationship between systematic risk and stock returns in the Indian equity market by comparing the Capital Asset Pricing Model (CAPM) and the Fama–French Three-Factor Model. Using market data for NSE-listed securities over the period April 2016 to March 2026, the study adopts a quantitative, empirical, and analytical research design to test whether factors such as market risk, firm size, and book-to-market value help explain stock returns more effectively than beta alone. The findings show that market risk is the dominant factor in explaining returns for the NSE Nifty index, while the additional size and value factors in the Fama–French model provide limited incremental explanatory power in this case. CAPM performs well because the Nifty represents the broader market portfolio, whereas the Fama–French model is theoretically stronger for individual stocks and diversified portfolios where size and value effects are more pronounced. Overall, the study concludes that CAPM remains a practical and effective model for broad market index analysis, while the Fama–French Three-Factor Model is more useful for stock-level and portfolio-level evaluation. A combined approach is recommended for more robust investment analysis in emerging markets like India.
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@article{Gobbilla2026Risk,
title = {Risk-Return Relationships in India: A Comparative Study of CAPM and Fama–French Three-Factor Model – A Study on NSE Nifty for the Period 2016–2026},
author = {Umamaheswararao Gobbilla and Chakali Sravani},
journal = {Research Digest on Engineering Management and Social Innovations},
year = {2026},
doi = {10.46647/rdems0206015},
url = {https://doi.org/10.46647/rdems0206015}
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