Reaching for Beta

Egemen Genc, Emanuel Moench and Altan Pazarbasi

No 20812, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Using equity mutual fund holdings and transactions, we show that managers actively tilt toward high-beta stocks when monetary policy is contractionary and short rates rise. This “reaching for beta†is persistent, elevates sector-wide net buying of high-beta stocks, and attracts fund inflows under tighter policy. It raises funds' raw but not risk-adjusted returns and induces temporary stock-level price pressure that subsequently reverts. We show that reaching for beta is consistent with fund managers counteracting investor outflows by boosting expected returns. Unlike reaching for yield in bonds, tighter policy increases risk-taking in equities, revealing a beta channel of monetary policy transmission.

Keywords: Risk-shifting (search for similar items in EconPapers)
JEL-codes: E44 G11 G12 G23 (search for similar items in EconPapers)
Date: 2025-11
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