On the Demand for High-Beta Stocks: Evidence from Mutual Funds

Susan Christoffersen () and Mikhail Simutin

The Review of Financial Studies, 2017, vol. 30, issue 8, 2596-2620

Abstract: Prior studies have documented that pension plan sponsors often monitor a fund’s performance relative to a benchmark. We use a first-difference approach to show that in an effort to beat benchmarks, fund managers controlling large pension assets tend to increase their exposure to high-beta stocks, while aiming to maintain tracking errors around the benchmark. The findings support theoretical conjectures that benchmarking can lead managers to tilt their portfolio toward high-beta stocks and away from low-beta stocks, which can reinforce observed pricing anomalies.Received March 20, 2014; editorial decision October 25, 2016 by Editor Laura Starks.

JEL-codes: G11 G23 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (27)

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