Low-Beta Investing with Mutual Funds
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
Date posted: September 5, 2012 ; Last revised: April 9, 2015
© 2016 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollobot1 in 0.188 seconds