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On the Demand for High-Beta Stocks: Evidence from Mutual Funds


  • Susan E. K. Christoffersen
  • Mikhail Simutin


Prior studies have documented that pension plan sponsors often monitor a fund’s performance relative to a benchmark. We use a first-difference approach to show that in an effort to beat benchmarks, fund managers controlling large pension assets tend to increase their exposure to high-beta stocks, while aiming to maintain tracking errors around the benchmark. The findings support theoretical conjectures that benchmarking can lead managers to tilt their portfolio toward high-beta stocks and away from low-beta stocks, which can reinforce observed pricing anomalies.Received March 20, 2014; editorial decision October 25, 2016 by Editor Laura Starks.

Suggested Citation

  • Susan E. K. Christoffersen & Mikhail Simutin, 2017. "On the Demand for High-Beta Stocks: Evidence from Mutual Funds," Review of Financial Studies, Society for Financial Studies, vol. 30(8), pages 2596-2620.
  • Handle: RePEc:oup:rfinst:v:30:y:2017:i:8:p:2596-2620.

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    Cited by:

    1. Asif Shamim & Atif Mumtaz & Bilawal Ali, 2020. "An empirical study to explore the risk adjusted performance of mutual funds: A case of Pakistan," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 7(01), pages 1-26, March.
    2. Fulkerson, Jon A. & Riley, Timothy B., 2019. "Portfolio concentration and mutual fund performance," Journal of Empirical Finance, Elsevier, vol. 51(C), pages 1-16.
    3. Park, Keun Woo & Han, Min Yeon & Oh, Ji Yeol Jimmy, 2020. "Beta or duration? Risk-taking by balanced mutual funds in Korea✰," Finance Research Letters, Elsevier, vol. 33(C).
    4. Huang, Jinbo & Li, Yong & Yao, Haixiang, 2018. "Index tracking model, downside risk and non-parametric kernel estimation," Journal of Economic Dynamics and Control, Elsevier, vol. 92(C), pages 103-128.
    5. Liu, Jianan & Stambaugh, Robert F. & Yuan, Yu, 2018. "Absolving beta of volatility’s effects," Journal of Financial Economics, Elsevier, vol. 128(1), pages 1-15.
    6. Boguth, Oliver & Simutin, Mikhail, 2018. "Leverage constraints and asset prices: Insights from mutual fund risk taking," Journal of Financial Economics, Elsevier, vol. 127(2), pages 325-341.

    More about this item

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors


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