Friday, August 8, 2014

Betting Against Beta--AQR's Clifford S. Asness et al: "Low-Risk Investing without Industry Bets"

From the Financial Analysts Journal:
The strategy of buying safe low-beta stocks while shorting (or underweighting) riskier high-beta stocks (“betting against beta”) has been shown to deliver significant risk-adjusted returns. Some have suggested, however, that such “low-risk investing” delivers high returns primarily because of industry bets that favor a slowly changing set of stodgy, stable industries. The authors refute this notion by showing that a strategy of betting against beta has delivered positive returns both as an industry-neutral bet within each industry and as a pure bet across industries.
...MORE (18 page PDF)

HT: Abnormal Returns