Cross-company effects of common ownership: Dealings between borrowers and lenders with a common blockholder

Gjergji Cici, Scott Gibson and Claire Rosenfeld

No 16-01, CFR Working Papers from University of Cologne, Centre for Financial Research (CFR)

Abstract: This paper investigates investment strategies that exploit the low-beta anomaly. Although the notion of buying low-beta stocks and selling high-beta stocks is natural, a choice is necessary with respect to the relative weighting of high-beta stocks and low-beta stocks in the investment portfolio. Our empirical results for US large-cap stocks show that this choice is very important for the risk-return characteristics of the resulting portfolios and their sensitivities to common risk factors. We also show that investment strategies based on betas have a natural-hedge component and a market-timing component due to the stochastic variation of betas. We construct indicators to exploit the market-timing component and show that they have substantial predictive power for future market returns. Corresponding market-timing strategies deliver large positive excess returns and high Sharpe ratios.

Keywords: cross-ownership; institutional ownership; active investment; credit market interactions; syndicated lending (search for similar items in EconPapers)
JEL-codes: D22 G21 G23 G30 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-cfn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfrwps:1601

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