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
Date Written: February 21, 2017
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: Suggested Citation