%0 Journal Article %1 berrada2014betaarbitrage %A Berrada, Tony %A Messikh, Reda J. %A Oderda, Gianluca %A Pictet, Olivier V. %D 2014 %I SSRN %J SSRN eLibrary %K quantfinance statistics %R 10.2139/ssrn.1976285 %T Beta-Arbitrage Strategies: When Do They Work, and Why? %X Contrary to what traditional asset pricing would imply, a strategy that bets against beta, by going long in low beta stocks and short in high beta stocks, tends to outperform the market. We consider a market in which diversity is maintained, i.e. no single stock can dominate the entire market, and we show that beta-arbitrage strategies mechanically out-perform the market portfolio. We provide empirical support to our explanation on equity country indices, equity sectors, individual stocks, and stock portfolios. Finally, we show how to construct optimal beta- arbitrage strategies that maximize the expected return relative to a given benchmark.

@article{berrada2014betaarbitrage, abstract = {Contrary to what traditional asset pricing would imply, a strategy that bets against beta, by going long in low beta stocks and short in high beta stocks, tends to outperform the market. We consider a market in which diversity is maintained, i.e. no single stock can dominate the entire market, and we show that beta-arbitrage strategies mechanically out-perform the market portfolio. We provide empirical support to our explanation on equity country indices, equity sectors, individual stocks, and stock portfolios. Finally, we show how to construct optimal beta- arbitrage strategies that maximize the expected return relative to a given benchmark.}, added-at = {2015-07-22T21:15:05.000+0200}, author = {Berrada, Tony and Messikh, Reda J. and Oderda, Gianluca and Pictet, Olivier V.}, biburl = {https://www.bibsonomy.org/bibtex/276433d9a85aa320004ab98bca9ddf053/shabbychef}, description = {Beta-Arbitrage Strategies: When Do They Work, and Why? by Tony Berrada, Reda Jürg Messikh, Gianluca Oderda, Olivier V. Pictet :: SSRN}, doi = {10.2139/ssrn.1976285}, interhash = {9eca224389508b41bb297a3ddfcd0550}, intrahash = {76433d9a85aa320004ab98bca9ddf053}, journal = {SSRN eLibrary}, keywords = {quantfinance statistics}, language = {English}, location = {http://ssrn.com/paper=1976285}, publisher = {SSRN}, timestamp = {2015-07-22T21:15:05.000+0200}, title = {{Beta-Arbitrage Strategies: When Do They Work, and Why?}}, type = {Working Paper Series}, year = 2014 }