The IUP Journal of Applied Economics
Industry Characteristics and Average Stock Returns: Evidence from India

Article Details
Pub. Date : Jan, 2022
Product Name : The IUP Journal of Applied Economics
Product Type : Article
Product Code : IJAE40122
Author Name : Anita*
Availability : YES
Subject/Domain : Economics
Download Format : PDF Format
No. of Pages : 16



As every industry is different in respect of competition, foreign exposure, profitability, etc., there is a need to examine their specific characteristics and assess their influence on stock returns. Therefore, this study attempts to examine the characteristics of selected industries and their influence on stock returns using panel data regression. On average, there are still some industries that are highly concentrated like warehousing and support activities for transportation, civil engineering, etc. More competition in these industries should be welcomed. As most of them are driven by the domestic market, steps need to be taken to increase their global market presence. Based on the examination of the influence of industry-specific factors on stock returns, the findings suggest that investors should focus on the average return on total assets to evaluate investment profile of stocks belonging to a particular industry .


Risk and return characteristics of every industry are different, and they depend on the policies and techniques adopted for production. Competition among the firms in a particular industry calls for the adoption of the most proficient production techniques, therefore all firms of a particular industry generally have similar return characteristics (Saji, 2011). Each industry has some unique attributes that influence the value of their securities, and the investors are expected to focus on these characteristics to evaluate the investment profile of stocks of a given industry. There are various variables which drive competition and help in assessing its strengths and weaknesses. Understanding these industry factors also helps in identifying the threats and opportunities which would help them survive in this ever-changing environment. Some of the key industry characteristics are entry barriers, sensitivity of sales, competitive condition, past sales, industry production, earning performance, industry life cycle, etc., which may affect stock prices/returns. However, there are only a few studies on the effect of industry-specific factors on stock prices/returns and that too in developed nations. This study examines the influence of industry-