《Malcolm Baker Brendan Bradley》.pdfVIP

The Low Beta Anomaly: A Decomposition into Micro and Macro Effects * Malcolm Baker Brendan Bradley Ryan Taliaferro September 13, 2013 Abstract Low beta stocks have offered a combination of low risk and high returns. We decompose the anomaly into micro and macro components. The micro component comes from the selection of low beta stocks. The macro component comes from the selection of low beta countries or industries. The two parts both contribute to the low beta anomaly, with important implications for the construction of managed volatility portfolios. * Malcolm Baker is professor of finance at Harvard Business School, research associate at the National Bureau of Economic Research, and senior consultant at Acadian Asset Management, Boston. Brendan Bradley is director of portfolio management at Acadian Asset Management, Boston. Ryan Taliaferro is portfolio manager at Acadian Asset Management, Boston. Note: The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research or Acadian Asset Management. In an efficient market, investors earn a higher return only to the extent that they bear higher risk. Despite the intuitive appeal of a positive risk-return relationship, this pattern has been surprisingly hard to find in the data, dating at least to Black (1972). For example, sorting stocks using measures of market beta or volatility shows just the opposite. Panel A of Figure 1 shows that, from 1968 through 2012 in the U.S. equity market, portfolios of low risk stocks deliver on the promise of lower risk as p