Understanding the impact of key drivers on betting against beta
an empirical study of us economy
DOI:
https://doi.org/10.23925/2179-3565.2024v15i3p132-151Palabras clave:
Betting against beta, Anomaly, USA economy, Trading volume, Time series, HML, Investor sentimentsResumen
This research paper investigates the factors that influence betting against beta anomalies, including interest rate (IR), investor sentiments (IS), USA stock trading volume (USV), momentum (MOM), high minus low (HML), small minus big (SMB), and market return in excess of T-bills (MKT). Monthly data is used in the current study for the period of 1987 to 2014 for US firms and data is analyze with the help of OLS regression. We find that HML, IS, and MOM have a significant positive impact on the BAB anomaly, while IR, MKT, and USV have a significant but negative impact. Prior research has not concurrently explored these factors, rendering our study distinct in its comprehensive analysis. The results of this study can be used by a variety of people to make more informed investment decisions and to improve the efficiency of the financial markets.
Citas
Abdollahi, H., Ebrahimi, S. B., & Tayebi, H. (2017). The Effect of Investor Sentiment on Betting Against Beta: A SEM Approach Towards Beta Anomaly. International Journal of Economics and Financial Issues, 7(1), 201-206.
Baker, M., Bradley, B., & Wurgler, J. (2011). Benchmarks as limits to arbitrage: Understanding the low-volatility anomaly. Financial Analysts Journal, 67(1), 40-54.
Baker, M., & Wurgler, J. (2006). Investor sentiment and the cross‐section of stock returns. The journal of Finance, 61(4), 1645-1680.
Bali, T. G., Brown, S. J., Murray, S., & Tang, Y. (2014). Betting against beta or demand for lottery. Available at SSRN 2481344.
Barroso, P., & Maio, P. (2016). Managing the risk of the “betting-against-beta” anomaly: does it pay to bet against beta? SSRN Electronic Journal, November.
Bathia, D., Bathia, D. B. D., & Bredin, D. (2016). An examination of investor sentiment effect on G7 stock market returns. Contemporary Issues in Financial Institutions and Markets, vol. II, 2, 99.
Blume, M. E., & Friend, I. (1973). A new look at the capital asset pricing model. The journal of finance, 28(1), 19-33.
Campbell, T. C., & Kassa, H. (2022). Betting against beta under incomplete information. Available at SSRN 3099547.
Canbaş, S., & Kandır, S. Y. (2009). Investor sentiment and stock returns: Evidence from Turkey. Emerging Markets Finance and Trade, 45(4), 36-52.
Durham, J. B. (2016). Betting against beta (and gamma) using government bonds. Financial Analysts Journal, November/December.
Fama, E. F., & French, K. R. (1992). The cross‐section of expected stock returns. the Journal of Finance, 47(2), 427-465.
Fama, E. F., & French, K. R. (1993). Common risk factors in the returns on stocks and bonds. Journal of financial economics, 33(1), 3-56.
Fama, E. F., & MacBeth, J. D. (1973). Risk, return, and equilibrium: Empirical tests. Journal of political economy, 81(3), 607-636.
Frazzini, A., & Pedersen, L. H. (2014). Betting against beta. Journal of financial economics, 111(1), 1-25.
Gaies, B., Nakhli, M. S., Ayadi, R., & Sahut, J.-M. (2022). Causal Links Between Investor Sentiment and Financial Instability: New Evidence from a Bootstrap Rolling Window Approach. Journal of Economic Behavior & Organization, 290-303.
Hakala, M. (2015). Betting against beta and investor sentiment.
Han, X. (2019). Understanding the performance of components in betting against beta. Forthcoming, Critical Finance Review.
Jegadeesh, N., & Titman, S. (1993). Returns to buying winners and selling losers: Implications for stock market efficiency. The Journal of finance, 48(1), 65-91.
Jensen, M. C., Black, F., & Scholes, M. S. (1972). The capital asset pricing model: Some empirical tests.
Kim, M., & Park, J. (2015). Individual investor sentiment and stock returns: Evidence from the Korean stock market. Emerging Markets Finance and Trade, 51(sup5), S1-S20.
Kolokolova, O., & Xu, X. (2022). Enhancing Betting Against Beta with Stochastic Dominance. Available at SSRN 4260904.
Lehnert, T. (2022). Betting against noisy beta. The Journal of Finance and Data Science, 8, 55-68.
Merton, R. C. (1987). A simple model of capital market equilibrium with incomplete information.
Muijsson, C., Fishwick, E., & Satchell, S. (2015). The Low Beta Anomaly and Interest Rates. In Risk-Based and Factor Investing (305-328): Elsevier.
Pasetti, T., & Montagna, D. M. (2021). The Low-Risk Effect, from Betting Against Beta to Betting Against Correlation. Available at SSRN 3995496.
Rana, R., Nagar, R., Bangur, H., & Shelke, A. (2021). Testing the Betting against Beta proposition in Indian Equity Market.
Santos, R., Dacanay, S., Jose, H., B, R., & Abueg, L. (2018). Essentials of Investments in the Philippine Capital Market.
Sehgal, S., Rakhyani, S., & Deisting, F. (2022). Does betting against beta strategy work in major Asian Markets? Pacific-Basin Finance Journal, 75, 101824.
Sørensen, S. (2015). Betting against beta-‐An empirical study.
Syrmas, V.-N. (2019). Betting against beta. Copenhagen Business School.
Wang, M. S., & Chen, T. Y. (2012). Market momentum, macroeconomic factors, and investor sentiment: Using the VAR model to evidence from Taiwan stock exchange. Journal of statistics and management systems, 15(1), 119-156.
Descargas
Publicado
Número
Sección
Licencia
This Journal is licensed under a Creative Commons Attribution-Non Commercial-No Derivers 4.0 International license.
1.The author (s) authorize the publication of the article in the journal;
2.The author (s) warrant that the contribution is original and unpublished and is not in the process of being evaluated in other journal (s);
3. The journal is not responsible for the opinions, ideas and concepts emitted in the texts, as they are the sole responsibility of its author (s);
4. The editors are entitled to make textual adjustments and to adapt the articles to the standards of publication.
