The low price anomaly and the Intriguing Case of the Polish Stock Market
Adam Zaremba , Szymon Okoń , Andrzej Nowak , Przemysław Konieczka
AbstractThis study investigates the low-price effect on the Polish stock market. By adopting sorting, cross-sectional tests and checks of the monotonic relation, we have examined the performance of the portfolios formed on the prices of over 850 companies listed on the Polish stock market within the years 2000-2014. Contrary to the globally prevailing evidence, the expensive stocks have significantly outperformed the cheap stocks. Additional sorts on value, size and momentum may be used further to improve the price-based strategies while the strongest anomaly has been identified among the growth companies. We hypothesize that the reverse character of the low-price anomaly may be explained by the impact of another phenomena: the underperformance of lottery-stocks. With the exception of the growth stocks, the reverse low-price effect is no longer significant after the exclusion of NewConnect companies. Finally, by adopting an alternative methodology, we have provided convincing out-of-sample evidence in support of the hypothesis of Baker et al. (2009) stating that corporate managers cater to investors by splitting their company shares in response to time-varying catering incentives.
|Journal series||Inzinerine Ekonomika-Engineering Economics, ISSN 1392-2785, (A 20 pkt)|
|Publication size in sheets||0.55|
|Keywords in English||low price effect; Polish stock market; Warsaw Stock Exchange; cross-section of stock returns; splits; catering theory; share prices; stock market anomalies; behavioral finance; factor investing; NewConnect; lottery stocks|
|ASJC Classification||; ;|
|Score|| = 20.0, 10-12-2019, ArticleFromJournal|
= 20.0, 10-12-2019, ArticleFromJournal
|Publication indicators||= 3; : 2016 = 0.862; : 2016 = 0.726 (2) - 2016=0.815 (5)|
* presented citation count is obtained through Internet information analysis and it is close to the number calculated by the Publish or Perish system.