- A blog example --Falken
- A fund example --AQR Defensive Fund
- A research example -- Betting Against Beta by Frazzini and Pedersen
I am a low-beta sheep, not a value sheep. Trust me.Hong and Sraer have a pretty cool paper explaining why low-beta might exist as a stand alone anomaly. The basic idea is that stocks with betas above a certain cut-off point and where investors expect a wide dispersion of possible outcomes, end up being overvalued. Why? Because in these high disagreement settings, investors who are extremely pessimistic about the stock will be unable to influence prices because of costly short-selling. Thus, on average, these higher beta, high disagreement stocks end up being overvalued.
[Not all high beta is bad; just high beta and high disagreement!] The results are hypothetical results and are NOT an indicator of future results and do NOT represent returns that any investor actually attained. Indexes are unmanaged, do not reflect management or trading fees, and one cannot invest directly in an index. Additional information regarding the construction of these results is available upon request.
Anyway, still digesting this paper, but thought it would be good to share.