Capitalizing on the Greatest Anomaly in Finance with Mutual Funds
The American College
February 4, 2013
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 portfolios of mutual funds based on beta, I examine whether or not mutual fund investors can capitalize on this anomaly. I find that one investing in a portfolio of funds in the top quintile of beta can improve her excess returns by an average of 2.97% a year without increasing risk by holding a levered position in a portfolio of funds in the bottom quintile instead.
Number of Pages in PDF File: 25
Keywords: Mutual fund performance, low risk stocks, CAPM, market anomalies
JEL Classification: G11, G12, G23working papers series
Date posted: September 5, 2012 ; Last revised: February 7, 2013
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo4 in 0.344 seconds