Size and momentum in European equity markets: empirical findings from varying beta Capital Asset Pricing Model

To authenticate to the full-text of this article, please visit this link: http://dx.doi.org/10.1111/j.1467-629X.2009.00314.x Byline: George Karathanasis (a), Konstantinos Kassimatis (a), Spyros Spyrou (b) Keywords: Asset pricing; Time-varying risk; Capital Asset Pricing Model Abstract: Abstract We use securities listed on 13 European equity markets to form size and momentum portfolios. We find limited evidence of a size premium but significant momentum returns in eight sample markets. We find that these premia may not constitute an anomaly because they are consistent with a varying-beta Capital Asset Pricing Model. We also show that systematic risk is related to the business cycle. Furthermore, the results suggest that although size and especially momentum returns are significant, it would be difficult to exploit them in the short to medium run, because they are positive and sizeable in very few years in our sample. Author Affiliation: Departments of(a)Business Administration (b)Accounting and Finance, Athens University of Economics and Business, GR10434 Athens, Greece Article History: Received 18 December 2008; accepted 1 April 2009 by Robert Faff (Editor).