UNIGE document Scientific Article
previous document  unige:81265  next document
add to browser collection

Beta-arbitrage strategies: when do they work, and why?

Oderda, Gianluca
Messikh, Reda Jurg
Pictet, Olivier
Published in Quantitative Finance. 2015, vol. 15, no. 2, p. 185-203
Abstract Contrary to what traditional asset pricing would imply, a strategy that bets against beta, by going long in low beta stocks and short in high beta stocks, tends to outperform the market. We consider a market in which diversity is maintained, i.e. no single stock can dominate the entire market, and we show that beta-arbitrage strategies mechanically out-perform the market portfolio. We provide empirical support to our explanation on equity country indices, equity sectors, individual stocks, and stock portfolios. Finally, we show how to construct optimal beta- arbitrage strategies that maximize the expected return relative to a given benchmark.
Keywords Relative arbitrageMarket diversityBeta
Full text
Article (Author postprint) (514 Kb) - document accessible for UNIGE members only Limited access to UNIGE
Article (Preprint) (503 Kb) - public document Free access
Other version: http://www.tandfonline.com/doi/abs/10.1080/14697688.2014.938446
Research group Geneva Finance Research Institute (GFRI)
(ISO format)
ODERDA, Gianluca et al. Beta-arbitrage strategies: when do they work, and why?. In: Quantitative Finance, 2015, vol. 15, n° 2, p. 185-203. https://archive-ouverte.unige.ch/unige:81265

113 hits



Deposited on : 2016-03-03

Export document
Format :
Citation style :