IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v70y2024i1p143-163.html
   My bibliography  Save this article

The Beta Anomaly and Mutual Fund Performance

Author

Listed:
  • Paul Irvine

    (Neeley School of Business, Texas Christian University, Fort Worth, Texas 76129)

  • Jeong Ho (John) Kim

    (Department of Economics, Emory University, Atlanta, Georgia 30322)

  • Jue Ren

    (Neeley School of Business, Texas Christian University, Fort Worth, Texas 76129)

Abstract

We find evidence for the beta anomaly in mutual fund performance. This anomaly is not accounted for in the standard four-factor framework, nor by the addition of a betting-against-beta factor to the benchmark model. We identify the active component of alpha (active alpha) not attributable to the passive effects related to beta. Active alpha is persistent and associated with superior portfolio performance. We find that, although many investors use standard alpha to allocate capital, a subset of sophisticated investors allocate their money based on active alpha. Our procedure is useful across the commonly used benchmark models for measuring performance and can be extended to accommodate other potential factor beta anomalies.

Suggested Citation

  • Paul Irvine & Jeong Ho (John) Kim & Jue Ren, 2024. "The Beta Anomaly and Mutual Fund Performance," Management Science, INFORMS, vol. 70(1), pages 143-163, January.
    • Handle: RePEc:inm:ormnsc:v:70:y:2024:i:1:p:143-163
    DOI: 10.1287/mnsc.2022.4639
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.2022.4639
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mnsc.2022.4639?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:70:y:2024:i:1:p:143-163. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.