Biweekly performance of low-risk anomalies over the FOMC cycle

Jaesun Yun and Kyung Yoon Kwon

Finance Research Letters, 2023, vol. 58, issue PC

Abstract: This paper examines how the performance of low-risk anomalies varies over the FOMC cycle as they are expected to be weaker as uncertainty is resolved following an FOMC meeting. We form a low-minus-high risk portfolio or betting-against-risk (BAR) portfolio, mimicking low-risk anomalies, using four proxies of risk, and find the biweekly pattern of returns for all four BAR portfolios after the FOMC meeting consistent with Cieslak et al. (2019). Taking advantage of the FOMC meeting schedule being known in advance, we propose dynamic BAR strategies. We find that the dynamic BAR strategy significantly outperforms the original low-minus-high risk portfolio.

Keywords: Low-risk anomaly; Beta anomaly; Betting against beta; Dynamic strategy; FOMC meeting (search for similar items in EconPapers)
JEL-codes: E58 G11 G12 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pc:s154461232300870x

DOI: 10.1016/j.frl.2023.104498

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