Business, Management and Education, Vol 12, No 2 (2014)

Quality Investing in CEE Emerging Markets

Adam Zaremba (Poznan University of Economics, Poland)


Using sorting, cross-sectional tests, regression, and tests of a monotonic relation, the study examines the return patterns related to seven distinct quality characteristics: accruals, bid-ask spread, balance sheet liquidity, profitability, leverage, payout ratio and turnover. The investigation of more than 1.300 stocks from 11 Central and Eastern European countries for the period 2002–2014 documents a strong gross-profitability premium and an inverted liquidity premium. Profitable and not heavily leveraged companies provide a partial hedge against market distress. Finally, the paper proposes quality spreads as a forecasting tool and shows that they have predictive abilities over quality premiums related to leverage, profitability and bid-ask spread.

Article in: English

Article published: 2014-12-23

Keyword(s): cross-section of stock returns; quality investing; CEE stock market; Central and Eastern Europe; gross profitability premium; liquidity premium; leverage; bid-ask spread; accruals.

DOI: 10.3846/bme.2014.241

Full Text: PDF pdf



1. Digesting anomalies in emerging European markets: A comparison of factor pricing models
Adam Zaremba, Anna Czapkiewicz
Emerging Markets Review  vol: 31  first page: 1  year: 2017  
doi: 10.1016/j.ememar.2016.12.002

Business, Management and Education ISSN 2029-7491, eISSN 2029-6169
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