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Beta-arbitrage strategies: when do they work, and why?
| Content Provider | Semantic Scholar |
|---|---|
| Author | Oderda, Gianluca Berrada, Tony Nicolas Messikh, Reda Jurg Pictet, Olivier |
| Copyright Year | 2015 |
| Abstract | Contrary to what traditional asset pricing would imply, a strategy that bets against beta, by going long in low beta stocks and short in high beta stocks, tends to outperform the market. We consider a market in which diversity is maintained, i.e. no single stock can dominate the entire market, and we show that beta-arbitrage strategies mechanically out-perform the market portfolio. We provide empirical support to our explanation on equity country indices, equity sectors, individual stocks, and stock portfolios. Finally, we show how to construct optimal beta- arbitrage strategies that maximize the expected return relative to a given benchmark. |
| Starting Page | 185 |
| Ending Page | 203 |
| Page Count | 19 |
| File Format | PDF HTM / HTML |
| DOI | 10.2139/ssrn.1976285 |
| Volume Number | 15 |
| Alternate Webpage(s) | https://archive-ouverte.unige.ch/files/downloads/0/0/0/4/5/3/1/2/unige_45312_attachment01.pdf |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |