An application of factor pricing models to the Polish stock market
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Date
Authors
Zaremba, Adam
Czapkiewicz, Anna
Szczygielski, Jan Jakub
Kaganov, Vitaly
Journal Title
Journal ISSN
Volume Title
Publisher
Routledge
Abstract
We evaluate and compare the performance of four popular factor pricing models: the capital asset pricing model, the Fama and French three-factor model, Carhart’s four-factor model, and the five-factor model of Fama and French. We aim to establish which of these models is most applicable in the Polish stock market. To do so, we employ a battery of tests—cross-sectional regressions, examination of one-way and two-way sorted portfolios, tests of monotonic relationships, and factor redundancy tests—and apply them to a sample of more than 1100 stocks for the years 2000–2018. The results indicate that the four-factor model outperforms the other models; it has the greatest explanatory ability for cross-sectional returns and is therefore well-suited for asset pricing in Poland.
Description
Keywords
Asset growth, Asset pricing, Equity anomalies, Factor models, Momentum, Poland, Polish stock market, Profitability, Size, Cross-section of returns, Value
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Citation
Adam Zaremba, Anna Czapkiewicz, Jan Jakub Szczygielski & Vitaly Kaganov (2019) An Application of Factor Pricing Models to the Polish Stock Market, Emerging Markets Finance and Trade, 55:9, 2039-2056, DOI: 10.1080/1540496X.2018.1517042.