Beta dispersion and portfolio returns

Kyre Dane Lahtinen (), Chris M. Lawrey () and Kenneth J. Hunsader ()
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Kyre Dane Lahtinen: University of South Alabama
Chris M. Lawrey: University of South Alabama
Kenneth J. Hunsader: University of South Alabama

Journal of Asset Management, 2018, vol. 19, issue 3, No 2, 156-161

Abstract: Abstract As any well-versed investor should know, there are many ways in which beta can be calculated based on factors such as the choice of time interval and market proxy used in the estimation process. Of course, this can lead to wide variation in beta estimates reported through publication sources. In this paper, we create portfolios based on the dispersion in the estimate of 27 different beta calculations. Defining stocks with higher variation in their beta estimates as higher risk, and consistent with risk-return theory, we find that portfolios of stocks with high dispersion across beta estimates outperform portfolios of stocks with low dispersion regardless of their level of systematic risk.

Keywords: Beta; Volatility; Risk and return (search for similar items in EconPapers)
JEL-codes: G10 G11 G12 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (2)

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DOI: 10.1057/s41260-017-0071-6

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