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The Low Beta Anomaly: A Decomposition into Micro and Macro Effects

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2013-10-03

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Baker, Malcolm, Brendan Bradley, and Ryan Taliaferro. "The Low Beta Anomaly: A Decomposition into Micro and Macro Effects." Financial Analysts Journal (forthcoming).

Abstract

Low beta stocks have offered a combination of low risk and high returns. We decompose the anomaly into micro and macro components. The micro component comes from the selection of low beta stocks. The macro component comes from the selection of low beta countries or industries. The two parts both contribute to the low beta anomaly, with important implications for the construction of managed volatility portfolios.

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asset management, low volatility, beta, portfolio construction, market efficiency, capital asset pricing model

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