Digesting anomalies in emerging European markets: A comparison of factor pricing models |
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| Affiliation: | 1. Poznan University of Economics and Business, Poland;2. AGH University of Science and Technology, Poland;1. Gabelli School of Business, Fordham University, 45 Columbus Avenue, New York, NY 10023;2. Gabelli School of Business, Fordham University, 113 West 60th Street, New York, NY 10023;1. School of Finance, Nankai University, Tianjin, PR China;2. College of Management and Economics, Tianjin University, Tianjin, PR China;3. Key Laboratory of Computation and Analytics of Complex Management Systems, Tianjin, PR China;4. China Center for Social Computing and Analytics, Tianjin University, Tianjin, PR China;5. School of Business, Nankai University, Tianjin, PR China |
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| Abstract: | ![]()
This study compares the performance of four popular factor pricing models—the capital asset-pricing model (Sharpe, 1964), the three-factor model of Fama and French (1993), the four-factor model of Carhart (1997), and the five-factor model of Fama and French (2015a)—testing their explanatory power over a broad range of cross-sectional return patterns in emerging European markets. We identify, classify, and replicate 100 anomalies documented in the financial literature. Only 20 (32) of the capitalization-weighted (equal-weighted) anomaly portfolios are significantly profitable. We show that the five-factor model best explains the returns of anomaly portfolios and verify its superiority over the other models. |
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