Size, value, and momentum in Polish equity returns: Local or international factors?
30 Pages Posted: 17 Feb 2014 Last revised: 22 Jul 2017
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
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