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The Impact Of Penny Stocks On The Pricing Of Companies Listed On The Warsaw Stock Exchange In Light Of The CAPM

Author

Listed:
  • Urbański Stanisław

    (AGH University of Science and Technology, Faculty of Management, Gramatyka 10, 30-067 Kraków, Poland)

  • Jawor Paweł

    (AGH University of Science and Technology, Faculty of Management, Gramatyka 10, 30-067 Kraków, Poland)

  • Urbański Kacper

    (Jagiellonian University in Krakow, Faculty of Philosophy, Gołębia 24, 31-007 Krakow, Poland)

Abstract

Oryginality and objective – Research on the pricing of stocks listed on developed markets shows inexplicable deviation from the pricing that could be observed with CAPM validity. A similar anomaly is found on the Polish market. Reasons for inconsistent pricing with CAPM are unknown, and they are the main objective of this research.Method – The study is conducted using stocks listed on the Warsaw Stock Exchange in 1995–2012. Quintile stock portfolios are formed on the basis of strategies widely used by investors. The study is carried out in several modes. In the subsequent modes penny stocks with the market values below 0.5, 1.5, 5.0 and 15.0 PLN are eliminated.Results – It is conjectured that both penny stocks and improper procedures for the test portfolios forming contribute to inconsistent stock pricing in light of the CAPM. The studies show that results are in line with the extended conjectures. Also, study results indicate that speculative stocks are mostly penny stocks, however, it is not possible to explicitly state that penny stock are speculative.

Suggested Citation

  • Urbański Stanisław & Jawor Paweł & Urbański Kacper, 2014. "The Impact Of Penny Stocks On The Pricing Of Companies Listed On The Warsaw Stock Exchange In Light Of The CAPM," Folia Oeconomica Stetinensia, Sciendo, vol. 14(2), pages 163-178, December.
    • Handle: RePEc:vrs:foeste:v:14:y:2014:i:2:p:163-178:n:15
    DOI: 10.1515/foli-2015-0015
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    stock pricing; penny stocks; stock portfolio; return changes;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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