Company size, book-to-market and momentum effects, and other deviations from the CAPM - evidence from the Warsaw stock exchange

Capital Asset Pricing Model is one of the most popular models applied to explain the risk premium for capital employment. The model has been tested for developed capital markets with conclusions that emphasized many of its imperfections. Some of these imperfections are connected with company characteristics, such as a company’s size, book-to-market value etc. The aim of the research is to test whether the anomalies of the CAPM that have been pointed out so far are also true for Poland. I concentrate on companies listed on the Warsaw Stock Exchange during 2007-2010. The event study is applied to identify these anomalies. The research results reveal that the expected returns approximated by the CAPM are contaminated during the evaluation process. This is in line with the conclusions of a previous research paper discussing developed countries