The beta anomaly and the quality effect in international stock markets
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Date
2023
Authors
Bradrania, R.
Veron, J.F.
Wu, W.
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Journal of Behavioral and Experimental Finance, 2023; 38(100808):1-18
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We investigate the beta anomaly and its relationship with stock quality in international stock markets. The beta anomaly exists in three aggregates (Europe, Pacific, and Global) and fourteen of the twenty-two country portfolios. We further demonstrate that stock quality explains the beta anomaly in international markets. The beta anomaly is statistically significant among junk (low-quality) stocks, and it does not exist among quality (high-quality) stocks. The results are robust in portfolio and regression analyses, both before and after controls. Finally, we show that the alphas of the beta anomaly estimated using the Fama–French-Carhart factor as well as Fama–French five-factor models disappear when augmented by the quality-minus-junk (QMJ) factor.
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Copyright 2023 Elsevier. Under a Creative Commons license (https://creativecommons.org/licenses/by/4.0/)
Access Condition Notes: Accepted manuscript is available open access