Digesting Anomalies in Emerging European Markets: A Comparison of Factor Pricing Models

Emerging Markets Review, 2017, 31, 1-15

32 Pages Posted: 28 Feb 2019

See all articles by Adam Zaremba

Adam Zaremba

Montpellier Business School; Poznan University of Economics and Business

Anna Czapkiewicz

AGH University of Science and Technology

Date Written: December 4, 2016

Abstract

This study compares the performance of four popular factor pricing models—the capital asset-pricing model (Sharpe, 1964), the three-factor model of Fama and French (1993), the four-factor model of Carhart (1997), and the five-factor model of Fama and French (2015a)—testing their explanatory power over a broad range of cross-sectional return patterns in emerging European markets. We identify, classify, and replicate 100 anomalies documented in the financial literature. Only 20 (32) of the capitalization-weighted (equal-weighted) anomaly portfolios are significantly profitable. We show that the five-factor model best explains the returns of anomaly portfolios and verify its superiority over the other models.

Keywords: asset pricing, factor models, anomalies, emerging European markets, emerging markets, cross section of returns, size, value, momentum, profitability, asset growth

JEL Classification: G11, G12, G14

Suggested Citation

Zaremba, Adam and Czapkiewicz, Anna, Digesting Anomalies in Emerging European Markets: A Comparison of Factor Pricing Models (December 4, 2016). Emerging Markets Review, 2017, 31, 1-15, Available at SSRN: https://ssrn.com/abstract=3332913

Adam Zaremba (Contact Author)

Montpellier Business School ( email )

2300 Avenue des Moulins
Montpellier, Occitanie 34000
France

Poznan University of Economics and Business ( email )

al. Niepodległości 10
Poznań, 61-875
Poland

HOME PAGE: http://adamzaremba.pl

Anna Czapkiewicz

AGH University of Science and Technology ( email )

30 Mickiewicza Av.
Kraków, 30-059
Poland

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