Low-β investing with mutual funds

Authors

  • David Nanigian The Richard D. Irwin Graduate School, The American College

DOI:

https://doi.org/10.61190/fsr.v23i4.3207

Keywords:

Beta, Market anomalies, CAPM, Low risk stocks, Mutual fund performance

Abstract

Contrary to the predictions of CAPM, empirical research has shown that investing in low-beta stocks can improve the mean-variance efficiency of an investor’s portfolio. Through forming portfo- lios of mutual funds based on beta, I examine whether or not mutual fund investors can capitalize on this puzzle. I find that one investing in a portfolio of funds in the top quintile of beta can improve her alpha by a statistically significant 2.9% to 4.9% a year, depending on the asset pricing model specification, by holding a portfolio of funds in the bottom quintile of beta instead.

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Published

2014-12-31

How to Cite

Nanigian, D. (2014). Low-β investing with mutual funds. Financial Services Review, 23(4), 361–383. https://doi.org/10.61190/fsr.v23i4.3207

Issue

Vol. 23 No. 4 (2014): Winter 2014

Section

New Original Submission

License

Copyright (c) 2014 Academy of Financial Services

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