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The Unintended Impact of Academic Research on Asset Returns: The Capital Asset Pricing Model Alpha

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  • Alex R. Horenstein

    (Department of Economics, Miami Herbert Business School, Coral Gables, Florida 33146)

Abstract

This paper explores a channel whereby asset-pricing anomalies can appear as investors alter portfolios according to findings in academic research. In particular, I find that assets with low realized capital asset pricing model (CAPM) alphas outperform those with high alphas, but this finding only appears after the CAPM’s publication in the 1960s. I find evidence consistent with the widespread application of the CAPM generating incentives to tilt portfolios systematically away from low CAPM alpha assets, causing such assets to be undervalued.

Suggested Citation

  • Alex R. Horenstein, 2021. "The Unintended Impact of Academic Research on Asset Returns: The Capital Asset Pricing Model Alpha," Management Science, INFORMS, vol. 67(6), pages 3655-3673, June.
    • Handle: RePEc:inm:ormnsc:v:67:y:2021:i:6:p:3655-3673
    DOI: 10.1287/mnsc.2020.3635
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    2. Blanco, Ivan & De Jesus, Miguel & Remesal, Alvaro, 2023. "Overlapping momentum portfolios," Journal of Empirical Finance, Elsevier, vol. 72(C), pages 1-22.

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