Low-Beta Investing with Mutual Funds

David Nanigian

The American College; Pennsylvania State University

October 24, 2014

Financial Services Review, 23(4) (Winter 2014), 361–383

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 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.

Number of Pages in PDF File: 23

Keywords: Mutual fund performance, low risk stocks, CAPM, market anomalies

JEL Classification: G11, G12, G23

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Date posted: September 5, 2012 ; Last revised: April 9, 2015

Suggested Citation

Nanigian, David, Low-Beta Investing with Mutual Funds (October 24, 2014). Financial Services Review, 23(4) (Winter 2014), 361–383. Available at SSRN: http://ssrn.com/abstract=2141460 or http://dx.doi.org/10.2139/ssrn.2141460

Contact Information

David Nanigian (Contact Author)
The American College ( email )
270 South Bryn Mawr Avenue
Bryn Mawr, PA 19010
United States
610-526-1324 (Phone)
610-516-1359 (Fax)
HOME PAGE: http://www.theamericancollege.edu/why-us/faculty/david-nanigian-ph.d
Pennsylvania State University ( email )
University Park
State College, PA 16802
United States
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