en
Scientific article
English

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

Published inQuantitative finance, vol. 15, no. 2, p. 185-203
Publication date2015
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 arbitrage
  • Market diversity
  • Beta
Citation (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. doi: 10.1080/14697688.2014.938446
Main files (2)
Article (Accepted version)
accessLevelRestricted
Article (Submitted version)
accessLevelPublic
Identifiers
ISSN of the journal1469-7688
588views
277downloads

Technical informations

Creation02/23/2016 9:50:00 AM
First validation02/23/2016 9:50:00 AM
Update time03/15/2023 12:11:23 AM
Status update03/15/2023 12:11:23 AM
Last indexation01/16/2024 8:22:33 PM
All rights reserved by Archive ouverte UNIGE and the University of GenevaunigeBlack