publication . Preprint . Article . Report . 2012

Speculative Betas

Harrison Hong; David Sraer;
Open Access
  • Published: 01 Nov 2012
Abstract
We provide a model for why high beta assets are more prone to speculative overpricing than low beta ones. When investors disagree about the common factor of cash-flows, high beta assets are more sensitive to this macro-disagreement and experience a greater divergence-of-opinion about their payoffs. Short-sales constraints for some investors such as retail mutual funds result in high beta assets being over-priced. When aggregate disagreement is low, expected return increases with beta due to risk-sharing. But when it is large, expected return initially increases but then decreases with beta. High beta assets have greater shorting from unconstrained arbitrageurs a...
Subjects
free text keywords: jel:G02, jel:G11, jel:G12
Funded by
NSF| Values and Finance: A Study of Socially Responsible Investing
Project
  • Funder: National Science Foundation (NSF)
  • Project Code: 0850404
  • Funding stream: Directorate for Social, Behavioral & Economic Sciences | Division of Social and Economic Sciences
,
EC| COGNITION
Project
COGNITION
Cognition and Decision-Making: Laws, Norms and Contracts
  • Funder: European Commission (EC)
  • Project Code: 249429
  • Funding stream: FP7 | SP2 | ERC
Powered by OpenAIRE Open Research Graph
Any information missing or wrong?Report an Issue
publication . Preprint . Article . Report . 2012

Speculative Betas

Harrison Hong; David Sraer;