2017/12/01 by Turan G. Bali, Stephen J. Brown, Scott Murray +1 · 372 citations
Economics, Econometrics and Finance · #Anomaly (physics) #Asset (computer security) #BETA (programming language) #Capital asset pricing model #Computer science #Econometrics #Economics #Financial Markets and Investment Strategies #Financial economics #Housing Market and Economics #Lottery #Microeconomics #Monetary economics #Physics #Sports Analytics and Performance
paper · doi:10.1017/s0022109017000928
published in Journal of Financial and Quantitative Analysis 52(6), 2369-2397 (Cambridge University Press)
openalex publication_date 2017/12/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/29
The low (high) abnormal returns of stocks with high (low) beta, which we refer to as the beta anomaly, is one of the most persistent anomalies in empirical asset pricing research. This article demonstrates that investors’ demand for lottery-like stocks is an important driver of the beta anomaly. The beta anomaly is no longer detected when beta-sorted portfolios are neutralized to lottery demand, regression specifications control for lottery demand, or factor models include a lottery demand factor. The beta anomaly is concentrated in stocks with low levels of institutional ownership and it exists only when the price impact of lottery demand is concentrated in high-beta stocks.