Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/130231 
Year of Publication: 
2015
Series/Report no.: 
CFR Working Paper No. 16-01
Publisher: 
University of Cologne, Centre for Financial Research (CFR), Cologne
Abstract: 
This paper investigates investment strategies that exploit the low-beta anomaly. Although the notion of buying low-beta stocks and selling high-beta stocks is natural, a choice is necessary with respect to the relative weighting of high-beta stocks and low-beta stocks in the investment portfolio. Our empirical results for US large-cap stocks show that this choice is very important for the risk-return characteristics of the resulting portfolios and their sensitivities to common risk factors. We also show that investment strategies based on betas have a natural-hedge component and a market-timing component due to the stochastic variation of betas. We construct indicators to exploit the market-timing component and show that they have substantial predictive power for future market returns. Corresponding market-timing strategies deliver large positive excess returns and high Sharpe ratios.
Subjects: 
cross-ownership
institutional ownership
active investment
credit market interactions
syndicated lending
JEL: 
D22
G21
G23
G30
Document Type: 
Working Paper

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