Factors affecting the stock price movements? Evidence from NIFTY-50 Stocks

Abstract

This study explores the determinant factors influencing the market price of stocks. A six-factor model has been constructed to explain the movement in the yearly market price of shares. Dividend per share, return on equity, price volatility, market capitalisation to enterprise value ratio, and beta are used as predictor variables in the model, with stock price as the outcome variable, consumer price index taken as a control variable. A 10-year panel data set of 42 companies from the Nifty-50 list has formed between the time span of 2011 to 2020. Pooled OLS (r2=0.57), fixed effect (r2=0.69) and random effect (r2=0.66) regression models have been used to draw inferences. Stock prices are influenced positively and significantly by return on equity, price volatility, and market capitalization to enterprise value ratio. However, dividend per share and beta do not to have a substantial impact on stock prices. This study provides insight to general investors to select more attractive stocks in their portfolios. Innumerable factors influence stock prices are left unobserved in the study. Insertion of some of these unobserved variables can explain stock price more accurately, and larger data sets can provide more evidence and robust results