A mathematical statistical pricing model for emerging stock markets

Abstract

This paper carries out a dynamic analysis of stock pricing in emerging economies, using a cointegration model on panel data, using ‘nested’ procedures with subsets of company groupings and time periods — taking Indian stock markets as the concrete case. It is observed that all classifications of company groupings do not result in similar observations. This helps in developing an approach to panel data estimation for financial markets without using structural equations. At the same time it develops a dynamic asset pricing model for emerging economies using India as a concrete case with net worth, profit, dividend, debt–equity ratio, interest cost and their growths as control variables.