Salience in beta anomaly

Xiaofang Li, Daye Li, Kefu Yi and Ming Men

Applied Economics, 2023, vol. 55, issue 55, 6479-6503

Abstract: This article shows that the beta anomaly in the capital asset pricing model arises when investors’ attention is drawn to salient payoffs owing to limited attention. Controlling for the salience effect renders the alphas of beta-sorted portfolios and betting-against-beta insignificant. Empirically, we find that stocks’ market beta is strongly related to salience measure, indicating that salience-demand price pressure falls predominantly on high-beta stocks. Furthermore, the low-beta anomaly occurs mainly during periods when the correlation between stocks’ salience and beta is high, indicating that the disproportionate salience-demand price pressure on high-beta stocks is an important driver of the beta anomaly.

Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2022.2156473 (text/html)
Access to full text is restricted to subscribers.

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:taf:applec:v:55:y:2023:i:55:p:6479-6503

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2022.2156473

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().