Illusionary Value, Size and Momentum Premiums in the CEE Markets

Adam Zaremba, Przemyslaw Konieczka
2014 Social Science Research Network  
The answer to the question posed in the title is mostly yes. Using sorting and crosssection, we investigate the impact of illiquidity and transaction costs on value, size and momentum premiums in 11 CEE stock markets () for the years 2000-2013. We find very high value and size premiums and strong synergy effects between value and momentum strategies. However, the impact of illiquidity and transaction costs is almost lethal. After accounting for varying bid-ask spreads and liquidity, only the
more » ... uidity, only the value premium survives. The size and momentum effects get obliterated. 1 The pioneers in CAPM testing were Black, Jensen and Scholes (1972) along with Fama and MacBeth (1973) . Other tests confirming the validity of the CAPM were conducted by Blume (1970 ), Friend and Blume (1970 ), Miller and Scholes (1972 ), and Blume and Friend (1973 . 2 The size effect means that small cap companies tend to generate higher returns on average. Tests on the size effect were provided by many researchers for the US and other developed markets (Banz, 1981;
doi:10.2139/ssrn.2375454 fatcat:uly6nhd4a5ctvj4un5yufy637i