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Size, Value, and Momentum in Polish Equity Returns: Local or International Factors?

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  • Zaremba Adam

    (Department of Investment and Capital Markets, Poznan School of Economics and Business, Poland; University of Dubai, United Arab Emirates)

  • Konieczka Przemysław

    (Collegium of World Economy, Warsaw School of Economics, Poland)

Abstract

This paper tests the performance of the Capital Asset Pricing Model (CAPM) and the Fama-French three-factor and Carhart four-factor models on the Polish market. We use stock level data from April 2001 to January 2014 and find strong evidence for value and momentum effects, but only weak evidence for size premium. We formed portfolios double-sorted on size and book-to-market ratios, as well as on size and momentum, and we explain their returns with the above-mentioned asset pricing models. The CAPM is rejected and the three-factor and four-factor models perform well for the size and B/M sorted portfolios, but fail to explain returns on the size and momentum sorted portfolios. With the exception of the momentum factor, 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.

Suggested Citation

  • Zaremba Adam & Konieczka Przemysław, 2017. "Size, Value, and Momentum in Polish Equity Returns: Local or International Factors?," International Journal of Management and Economics, Warsaw School of Economics, Collegium of World Economy, vol. 53(3), pages 26-47, September.
    • Handle: RePEc:vrs:ijomae:v:53:y:2017:i:3:p:26-47:n:3
    DOI: 10.1515/ijme-2017-0017
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    More about this item

    Keywords

    value effect; size effect; momentum effect; Fama-French three-factor model; Carhart four-factor model; Polish market; asset pricing; market segmentation;
    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
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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