The beta anomaly and the quality effect in international stock markets

Reza Bradrania, Jose Francisco Veron and Winston Wu

Journal of Behavioral and Experimental Finance, 2023, vol. 38, issue C

Abstract: We investigate the beta anomaly and its relationship with stock quality in international stock markets. The beta anomaly exists in three aggregates (Europe, Pacific, and Global) and fourteen of the twenty-two country portfolios. We further demonstrate that stock quality explains the beta anomaly in international markets. The beta anomaly is statistically significant among junk (low-quality) stocks, and it does not exist among quality (high-quality) stocks. The results are robust in portfolio and regression analyses, both before and after controls. Finally, we show that the alphas of the beta anomaly estimated using the Fama–French–Carhart factor as well as Fama–French five-factor models disappear when augmented by the quality-minus-junk (QMJ) factor.

Keywords: Beta; Stock returns; Beta anomaly; Betting against beta; Abnormal returns; Stock quality (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:beexfi:v:38:y:2023:i:c:s2214635023000229

DOI: 10.1016/j.jbef.2023.100808

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