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Betting against beta with intraday and overnight signals

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  • Insana, Alessandra

Abstract

The abnormal returns of the Betting Against Beta (BAB) strategy have attracted much interest among researchers and practitioners. Based on a market anomaly related to the Capital Asset Pricing Model, this strategy uses daily beta as a signal for portfolio construction. However, recent literature shows how some financial quantities, including beta, change between trading and non-trading periods. For this reason, we decided to compare the performance of the original BAB strategy with two BAB variants, where the signal for portfolio construction is given by intraday and overnight beta, respectively. Despite all strategies exhibiting positive cumulative returns, using the intraday beta signal leads to significantly higher performances. Further analyses show that the abnormal intraday BAB returns are mainly due to nano and micro-cap stocks which tend to outperform large-cap stocks, as well known from the literature.

Suggested Citation

  • Insana, Alessandra, 2023. "Betting against beta with intraday and overnight signals," International Review of Financial Analysis, Elsevier, vol. 86(C).
    • Handle: RePEc:eee:finana:v:86:y:2023:i:c:s1057521923000583
    DOI: 10.1016/j.irfa.2023.102542
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    References listed on IDEAS

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    More about this item

    Keywords

    Beta; Beta overnight; Beta intraday; Betting against beta; Anomalies;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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