Which Risk Factors Are Priced in the Polish Equity Market? Evidence from Fama–MacBeth Regressions
Which Risk Factors Are Priced in the Polish Equity Market? Evidence from Fama–MacBeth Regressions

Summary/Abstract: Aim: The article examines whether locally constructed risk factors are priced in the cross-section of Polish equity returns. Methodology: The author used monthly data for 1,318 companies listed on the WSE Main Market and NewConnect from July 2002 to December 2025. Local market, size, value, and momentum factors were tested within the CAPM, Fama–French three-factor, and Carhart four-factor frameworks. The analysis applied time-series regressions, the GRS test, and Fama–MacBeth regressions with Newey-West and Shanken-corrected inference. Findings: Multifactor models described Polish portfolio returns better than the CAPM, but improved time-series fit did not necessarily imply cross-sectional pricing. The momentum factor showed the strongest unconditional premium, while the Fama–MacBeth regressions provided the clearest evidence that size exposure commanded a positive price of risk in the analysed sample. Value and momentum effects were visible in portfolio returns, but their betas did not always yield statistically significant and economically consistent prices of risk. Implications: The results indicate that factor returns, model fit, and priced risk premia should be interpreted separately. For practitioners, size, value, and momentum may support portfolio construction, but should not be treated mechanically as priced sources of systematic risk. Originality/value: The article provides a direct beta-pricing test for the Polish equity market using local factors and a broad sample including both the WSE Main Market and NewConnect.

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