Size and Value Efects in the Visegrad Countries

Magdalena Morgese Borys and Petr Zemcik ()

CERGE-EI Working Papers from The Center for Economic Research and Graduate Education - Economics Institute, Prague

Abstract: The 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.

Keywords: CAPM; Fama and French factors; Regional Asset Pricing Model; size; book-to-market; Visegrad countries; emerging markets. (search for similar items in EconPapers)
JEL-codes: G10 G11 G12 (search for similar items in EconPapers)
Date: 2009-09
New Economics Papers: this item is included in nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Size and Value Effects in the Visegrad Countries (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:cer:papers:wp391

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