Trading Costs, Short Sale Constraints, and the Performance of Stock Market Anomalies in Emerging Europe

Economic Research, 2019, 32 (1), 403-422

21 Pages Posted: 12 May 2016 Last revised: 17 Apr 2019

See all articles by Adam Zaremba

Adam Zaremba

Poznań University of Economics and Business; University of Dubai

Jerzy Nikorowski

BGŻ BNP Paribas

Date Written: February 21, 2017

Abstract

The study has investigated the impact of trading costs and short sale constraints on the performance of 70 stock market anomalies in Emerging Europe. While over 30 of the replicated strategies – mostly related to value, momentum, technical analysis, profitability, and issuance effects – delivered significant abnormal returns, the impact of trading costs and short-sale constraints proved truly lethal to most strategies. Once we accounted for commissions, bid-ask spreads, company size, weighting method, and short-sale unavailability, only a handful of anomalies remain significantly profitable. Our research relied on sorting procedures and cross-sectional tests applied to a sample of over 1,800 stocks from the Czech Republic, Hungary, Poland, Russia and Turkey in the years 2000 to 2015.

Keywords: Stock Market Anomalies, Trading Costs, Short-Sale Constraints, Liquidity, Investment Strategies, Eastern Europe, Emerging Markets, Market Efficiency, Asset Pricing, Predicting Returns, Cross Section of Stock Returns

JEL Classification: G11, G12, G14, G15

Suggested Citation

Zaremba, Adam and Nikorowski, Jerzy, Trading Costs, Short Sale Constraints, and the Performance of Stock Market Anomalies in Emerging Europe (February 21, 2017). Economic Research, 2019, 32 (1), 403-422. Available at SSRN: https://ssrn.com/abstract=2778063 or http://dx.doi.org/10.2139/ssrn.2778063

Adam Zaremba (Contact Author)

Poznań University of Economics and Business ( email )

al. Niepodległości 10
Poznań, 61-875
Poland

HOME PAGE: http://adamzaremba.pl

University of Dubai ( email )

Academic City
Dubai, 14143
United Arab Emirates

HOME PAGE: http://adamzaremba.pl/

Jerzy Nikorowski

BGŻ BNP Paribas ( email )

ul. Slider 3, 02-676
Warsaw
Poland

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