The Low-Risk Anomaly: Evidence from the Thai Stock Market

Kanis Saengchote ()
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Kanis Saengchote: Department of Banking and Finance, Mahitaladhibesra Building, Chulalongkorn Business School, Chulalongkorn University, Phayathai Road, Pathumwan, Bangkok, 10330, Thailand

Asian Academy of Management Journal of Accounting and Finance (AAMJAF), 2017, vol. 13, issue 1, 143-158

Abstract: In many developed countries, low-risk stocks tend to earn superior risk-adjusted returns compared to high-risk stock. Using data on the Stock Exchange of Thailand between 2004 and 2015, this paper shows that the abnormal returns associated with investing in low-beta stocks are significant and robust. The zero-cost portfolio that longs low-beta stocks and shorts high-beta stocks delivers monthly four-factor alpha of 1.26%. This paper provides suggestive evidence that, in addition to leverage constraints, the low-risk anomaly can be caused by institutional designs that favour stocks that are index constituents.

Keywords: beta; Capital Asset Pricing Model (CAPM); leverage constraints; benchmarking; index inclusion (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (6)

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