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Size, value, and momentum in Polish equity returns: Local or international factors?

30 Pages Posted: 17 Feb 2014 Last revised: 22 Jul 2017

Adam Zaremba

Poznań University of Economics and Business

Przemyslaw Konieczka

Warsaw School of Economics (SGH)

Date Written: February 16, 2014

Abstract

In this paper, I test the performance of the CAPM, Fama-French three-factor and Carhart four-factor models on the Polish market. I use stock level data from April 2001 to January 2014. I find strong evidence for the value and momentum effects, but only weak evidence for the size premium. I form portfolios double-sorted on size and book-to-market ratios, as well as on size and momentum, and I try to explain their returns with the above-mentioned asset pricing models. The CAPM model is rejected and the three-factor and four-factor models perform well for the size and B/M sorted portfolios, but fail to explain the returns on the size and momentum sorted portfolios. With the exception of the momentum factor, the local Polish factors are not correlated with their European and global counterparts, suggesting market segmentation. Finally, the international value, size and momentum factors perform poorly in explaining cross-sectional variation in stock returns on the Polish market.

Keywords: value effect, size effect, momentum effect, Fama-French three-factor model, Carhart-four-factor model, Polish market, asset pricing, market segmentation

JEL Classification: G11, G12, G14, G15

Suggested Citation

Zaremba, Adam and Konieczka, Przemyslaw, Size, value, and momentum in Polish equity returns: Local or international factors? (February 16, 2014). Available at SSRN: https://ssrn.com/abstract=2396884 or http://dx.doi.org/10.2139/ssrn.2396884

Adam Zaremba (Contact Author)

Poznań University of Economics and Business ( email )

al. Niepodległości 10
Poznań, 61-875
Poland

HOME PAGE: http://adamzaremba.pl

Przemyslaw Konieczka

Warsaw School of Economics (SGH) ( email )

Niepodleglosci 162
PL-Warsaw, 02-554
Poland

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