Low-beta strategies

Olaf Korn and Laura-Chloé Kuntz

No 15-17 [rev.], CFR Working Papers from University of Cologne, Centre for Financial Research (CFR)

Abstract: This paper analyzes trading strategies designed to 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 portfolio. Our empirical results for US stocks show that this choice is very important for the risk-return characteristics of the resulting portfolios and their sensitivities to common risk factors. The weighting of stocks within the low-beta and high-beta portfolios and the chosen investment universe are essential design elements of low-beta strategies too. If smaller firms are excluded, risk-adjusted returns of low-beta strategies can even become insignificant.

Keywords: low-beta anomaly; trading strategies; factor risk premiums; smart beta (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 (search for similar items in EconPapers)
Date: 2017, Revised 2017
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfrwps:1517r

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