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Size and Value Effects in the Visegrad Countries

Author

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  • Magdalena Morgese Borys
  • Petr ZemÄÂik

Abstract

This paper has two main objectives. The first is to test for the presence of size and book-to-market value effects in the Visegrad countries (the Czech Republic, Hungary, Poland, and Slovakia). Such effects have been found in the U.S. stock market and in many other developed stock markets. The authors demonstrate that sizeand value do explain the expected return/cost of capital in eastern Europe. From this result they proceed by constructing regional size and book-to-market portfolios for a combined Visegrad market. Returns on these portfolios serve as factors in addition to the market portfolio. The second objective is constructing a model for the cost of capital. The regional three-factor model outperforms country-specific versions of the model, and it can be estimated for a more current sample in Prague, Budapest, Warsaw, and Bratislava. Therefore, it is a plausible model for the cost of capital in this region, and it is used to calculate the cost of capital for the following industries: banks; capital goods; food, beverage, and tobacco; materials; and utilities.

Suggested Citation

  • Magdalena Morgese Borys & Petr ZemÄÂik, 2011. "Size and Value Effects in the Visegrad Countries," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 47(3), pages 50-68, May.
    • Handle: RePEc:mes:emfitr:v:47:y:2011:i:3:p:50-68
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    Cited by:

    1. Jan Hanousek & Evžen Kočenda, 2011. "Foreign News and Spillovers in Emerging European Stock Markets," Review of International Economics, Wiley Blackwell, vol. 19(1), pages 170-188, February.
    2. Bodeutsch, D.S. & Franses, Ph.H.B.F., 2013. "Size and value effects in Suriname," Econometric Institute Research Papers EI 2013-31, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    3. Adam ZAREMBA, 2015. "Low Risk Anomaly In The Cee Stock Markets," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 81-102, September.
    4. Waszczuk, Antonina, 2013. "A risk-based explanation of return patterns—Evidence from the Polish stock market," Emerging Markets Review, Elsevier, vol. 15(C), pages 186-210.
    5. 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.

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    More about this item

    Keywords

    book-to-market ratio; Fama and French factors; size; Visegrad countries;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • 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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