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A risk-based explanation of return patterns—Evidence from the Polish stock market

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  • Waszczuk, Antonina
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    Abstract

    Using both sorting and cross-sectional tests, this paper investigates the patterns in the average stock returns related to stock fundamentals, past return performance, idiosyncratic risk, and turnover in the Polish equity market for the period 2002–2011. To examine the persistence of the patterns, we apply the Monotonic Relation test of Patton and Timmermann (2010). The results favour the book-to-market ratio as a determinant of the cross-sectional variation of stock returns while momentum remains insignificant. The Fama and French (1993) three-factor model, which uses local size and value risk premiums adjusted for the skewed size distribution of the sample, captures most of the recognised anomalies. Further, we show that Polish domestic SMB and HML factors are not correlated with their U.S. and German counterparts.

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    Bibliographic Info

    Article provided by Elsevier in its journal Emerging Markets Review.

    Volume (Year): 15 (2013)
    Issue (Month): C ()
    Pages: 186-210

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    Handle: RePEc:eee:ememar:v:15:y:2013:i:c:p:186-210

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    Web page: http://www.elsevier.com/locate/inca/620356

    Related research

    Keywords: CAPM anomalies; Return patterns; Warsaw Stock Exchange; Three-factor model; Momentum; Local risk factors;

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    Cited by:
    1. Batten, Jonathan A. & Kinateder, Harald & Wagner, Niklas, 2014. "Multifractality and value-at-risk forecasting of exchange rates," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 401(C), pages 71-81.

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