References (38)


Citations (14)


Footnotes (23)



Speculative Betas

Harrison G. Hong

Princeton University - Department of Economics; National Bureau of Economic Research (NBER)

David Alexandre Sraer

University of California, Berkeley; Princeton University

November 2012

NBER Working Paper No. w18548

We provide a model for why high beta assets are more prone to speculative overpricing than low beta ones. When investors disagree about the common factor of cash-flows, high beta assets are more sensitive to this macro-disagreement and experience a greater divergence-of-opinion about their payoffs. Short-sales constraints for some investors such as retail mutual funds result in high beta assets being over-priced. When aggregate disagreement is low, expected return increases with beta due to risk-sharing. But when it is large, expected return initially increases but then decreases with beta. High beta assets have greater shorting from unconstrained arbitrageurs and more share turnover. Using measures of disagreement about stock earnings and economic uncertainty, we verify these predictions. A calibration exercise yields reasonable parameter values.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Number of Pages in PDF File: 51

Open PDF in Browser Download This Paper

Date posted: November 20, 2012  

Suggested Citation

Hong, Harrison G. and Sraer , David Alexandre, Speculative Betas (November 2012). NBER Working Paper No. w18548. Available at SSRN: http://ssrn.com/abstract=2178327

Contact Information

Harrison G. Hong (Contact Author)
Princeton University - Department of Economics ( email )
Princeton, NJ 08544-1021
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
David Alexandre Sraer
University of California, Berkeley ( email )
310 Barrows Hall
Berkeley, CA 94720
United States
Princeton University ( email )
22 Chambers Street
Princeton, NJ 08544
United States
Feedback to SSRN

Paper statistics
Abstract Views: 450
Downloads: 9
References:  38
Citations:  14
Footnotes:  23

© 2015 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo7 in 0.359 seconds