Size and Value Efects in the Visegrad Countries
AbstractThe paper has two main objectives. The first is to test for the presence of the size and bookto- market value effects in the Visegrad countries. Such effects have been found in the United States and many other developed stock markets. The Visegrad countries consist of the Czech Republic, Hungary, Poland, and Slovakia. We demonstrate that size and value do in fact explain the expected return/cost of capital in Eastern Europe. Based on this result, we proceed by constructing regional size and book-to-market portfolios for a combined Visegrad market. Returns on these port-folios serve as factors in addition to the market portfolio. The regional three-factor model performs as well as country-specific versions of the model. However, it can be estimated for a more current sample in Prague, Warsaw, Budapest, and Bratislava. Therefore it is a plausible model for the cost of capital in this region and we use it to calculate the cost of capital for the following industries: banks; capital goods; food, beverage and tobacco; materials; and utilities.
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Bibliographic InfoPaper provided by The Center for Economic Research and Graduate Education - Economic Institute, Prague in its series CERGE-EI Working Papers with number wp391.
Date of creation: Sep 2009
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CAPM; Fama and French factors; Regional Asset Pricing Model; size; book-to-market; Visegrad countries; emerging markets.;
Other versions of this item:
- 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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