Abstract

http://ssrn.com/abstract=2408146
 


 



A Lottery Demand-Based Explanation of the Beta Anomaly


Turan G. Bali


Georgetown University - Robert Emmett McDonough School of Business

Stephen Brown


New York University (NYU) - Leonard N. Stern School of Business

Scott Murray


J. Mack Robinson College of Business - Georgia State University

Yi Tang


Fordham University - Gabelli School of Business

May 1, 2016

Georgetown McDonough School of Business Research Paper No. 2408146

Abstract:     
The low (high) abnormal returns of stocks with high (low) beta -- the beta anomaly -- is one of the most persistent anomalies in empirical asset pricing research. This paper demonstrates that investors' demand for lottery-like stocks is an important driver of the beta anomaly. When beta-sorted portfolios are constructed to be neutral to lottery demand, the beta anomaly is no longer detected. Regression analyses indicate a positive and significant relation between beta and expected stock returns after controlling for lottery demand. The abnormal returns associated with the beta anomaly are explained by a lottery demand factor. The beta anomaly exists only when the price impact of lottery demand falls disproportionately on high-beta stocks and is concentrated in stocks with low levels of institutional ownership.

Number of Pages in PDF File: 83

Keywords: Beta, Beta Anomaly, Lottery Demand, Stock Returns

JEL Classification: G11, G12, G14


Open PDF in Browser Download This Paper

Date posted: March 13, 2014 ; Last revised: May 6, 2016

Suggested Citation

Bali, Turan G. and Brown, Stephen and Murray, Scott and Tang, Yi, A Lottery Demand-Based Explanation of the Beta Anomaly (May 1, 2016). Georgetown McDonough School of Business Research Paper No. 2408146. Available at SSRN: http://ssrn.com/abstract=2408146 or http://dx.doi.org/10.2139/ssrn.2408146

Contact Information

Turan G. Bali
Georgetown University - Robert Emmett McDonough School of Business ( email )
3700 O Street, NW
Washington, DC 20057
United States
(202) 687-5388 (Phone)
(202) 687-4031 (Fax)
HOME PAGE: http://faculty.msb.edu/tgb27/index.html

Stephen Brown
New York University (NYU) - Leonard N. Stern School of Business ( email )
44 West 4th Street
New York, NY NY 10012
United States

Scott Murray (Contact Author)
J. Mack Robinson College of Business - Georgia State University ( email )
35 Broad St. NW
Atlanta, GA 30303
United States
404-413-7351 (Phone)
Yi Tang
Fordham University - Gabelli School of Business ( email )
113 West 60th Street
New York, NY 10023
United States

Feedback to SSRN


Paper statistics
Abstract Views: 5,177
Downloads: 1,496
Download Rank: 8,086

© 2016 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollobot1 in 0.281 seconds