The strategy of buying safe low-beta stocks while shorting (or underweighting) riskier high-beta stocks (“betting against beta”) has been shown to deliver significant risk-adjusted returns. Some have suggested, however, that such “low-risk investing” delivers high returns primarily because of industry bets that favor a slowly changing set of stodgy, stable industries. The authors refute this notion by showing that a strategy of betting against beta has delivered positive returns both as an industry-neutral bet within each industry and as a pure bet across industries.

Author Information

Clifford S. Asness is managing and founding principal at AQR Capital Management, LLC, Greenwich, Connecticut.

Andrea Frazzini is a principal at AQR Capital Management, LLC, Greenwich, Connecticut.

Lasse H. Pedersen is a professor at Copenhagen Business School and New York University Stern School of Business and a principal at AQR Capital Management, LLC.

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