EconPapers    
Economics at your fingertips  
 

Beta uncertainty

Fabian Hollstein, Marcel Prokopczuk () and Chardin Wese Simen

Journal of Banking & Finance, 2020, vol. 116, issue C

Abstract: A stock’s exposure to systematic risk factors is surrounded by substantial uncertainty. This beta uncertainty is both economically and statistically significantly priced in the cross-section of stock returns. Stocks with high beta uncertainty substantially underperform those with low beta uncertainty: a two-standard-deviation increase in the measure decreases average annual returns by 9.7%. These results cannot be explained by previously discovered determinants of cross-sectional stock returns. Aggregate beta uncertainty negatively predicts market excess returns in the short and medium term. We find supporting evidence for a mispricing explanation of the beta uncertainty premium.

Keywords: Beta; CAPM; Disagreement; Ambiguity; Parameter uncertainty (search for similar items in EconPapers)
JEL-codes: G11 G12 G17 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426620301011
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:116:y:2020:i:c:s0378426620301011

DOI: 10.1016/j.jbankfin.2020.105834

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2021-06-30
Handle: RePEc:eee:jbfina:v:116:y:2020:i:c:s0378426620301011