Stock Selection in the Eastern European Emerging Markets

Abstract

Several former eastern European countries will soon become part of the European Union, which is likely to expand the investment opportunities for global investors. This article explores the ability of value, expectational and sentimental factors to predict equity returns in Hungary, Poland, the Czech Republic, and Russia. After making adjustments to the data, I investigate the potential of changes in IBES earnings forecasts, price to book, market value, and price momentum to forecast returns. Univariate tests suggest that these variables do have forecasting value, but are more robust when combined together.