MUMBAI, India, March 13 -- Intellectual Property India has published a patent application (202641025487 A) filed by Dr. Karthik Reddy; Kavita Mahar; Dr. Jayalakshmi N. A; Dr. Vishnu Govindan; and Dr. Mahabub Basha S, Bengaluru, Karnataka, on March 4, for 'capm extension for illiquidity and behavioral assets in emerging markets.'
Inventor(s) include Dr. Karthik Reddy; Kavita Mahar; Dr. Jayalakshmi N. A; Dr. Vishnu Govindan; and Dr. Mahabub Basha S.
The application for the patent was published on March 13, under issue no. 11/2026.
According to the abstract released by the Intellectual Property India: "This invention proposes an advanced extension of the Capital Asset Pricing Model (CAPM) tailored for emerging markets by incorporating illiquidity risk and behavioral asset dynamics into a unified asset pricing framework. Traditional CAPM assumes frictionless markets, rational investors, and perfect liquidity; however, emerging economies are characterized by thin trading volumes, high transaction costs, information asymmetry, sentiment-driven trading, and episodic market inefficiencies. The proposed model introduces an Illiquidity Adjustment Factor (IAF) derived from bid-ask spreads, turnover ratios, price impact measures, and time- to-liquidation metrics, along with a Behavioral Sentiment Coefficient (BSC) computed using investor sentiment indices, volatility clustering, momentum persistence, overreaction- correction cycles, and social or news-based sentiment analytics. These additional systematic risk components are integrated into an extended beta formulation, producing a multi-factor expected return equation that captures liquidity shocks and behavioral mispricing risks alongside traditional market risk premium. The framework utilizes econometric calibration techniques including rolling regression, GARCH-based volatility estimation, and machine learning-assisted parameter optimization to dynamically update risk exposures in real time. The invention further provides a computational architecture capable of ingesting structured and unstructured financial data, generating liquidity-adjusted and behavior-adjusted asset pricing outputs for equities, fixed income instruments, and alternative assets within emerging market ecosystems. By quantifying liquidity constraints and psychological biases as priced risk factors, the model enhances portfolio optimization, risk-adjusted performance measurement, capital budgeting decisions, and derivative valuation in environments where classical CAPM systematically underestimates risk. Empirical validation modules embedded within the system test statistical significance using panel data across multiple emerging economies, enabling adaptive recalibration under changing macroeconomic regimes. The invention therefore bridges the theoretical gap between traditional asset pricing theory and real-world market frictions, offering institutional investors, policymakers, and financial technology platforms a robust, scalable, and data-driven pricing mechanism specifically designed for volatile and structurally imperfect markets. This extended CAPM framework improves predictive accuracy, reduces mispricing distortions, and provides a more comprehensive risk premium estimation model suitable for practical implementation in emerging financial systems."
Disclaimer: Curated by HT Syndication.
