Do hedge funds bet against beta?

Alexey Malakhov, Timothy B. Riley and Qing Yan

International Review of Economics & Finance, 2024, vol. 93, issue PA, 1507-1525

Abstract: Differences in conditions within the mutual fund and hedge fund industries should lead to different approaches with respect to the low beta anomaly. We find that, unlike most mutual funds, the average hedge fund tends to benefit considerably from the anomaly. About 2.3% per year of apparent alpha for the average hedge fund can be attributed to the low beta anomaly rather than manager skill. Low skill managers rely the most on the anomaly to generate returns, with the most reliant underperforming the least reliant by 5.9% per year.

Keywords: Hedge funds; Mutual funds; Factor exposures; Betting against beta; Factor models; Return attribution; Performance evaluation; Alpha; Performance prediction; Beta; Anomaly; Benchmarks; Leverage; Factor timing (search for similar items in EconPapers)
JEL-codes: G10 G11 G14 G20 G23 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:93:y:2024:i:pa:p:1507-1525

DOI: 10.1016/j.iref.2024.04.021

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