Journal of Investment Strategies
ISSN:
2047-1238 (print)
2047-1246 (online)
Editor-in-chief: Ali Hirsa
Need to know
- The beta anomaly implies that investing in low-risk stocks is a compelling strategy for risk-averse long-term investors.
- We provide an analytical framework for investors to easily quantify the long-term benefits of low-beta investing relative to those of other investment strategies.
- Our framework is cast in continuous time and builds upon disparate theoretical work on the fractional Kelly criterion aimed at maximizing long-term median wealth.
Abstract
ABSTRACT
Stocks with high Sharpe ratios and low volatility are powerful drivers of long-term wealth. Low-beta stocks have precisely this feature. Using the framework of fractional Kelly strategies, we show that optimal portfolios with low-beta stocks generate higher median wealth and lower intra-horizon shortfall risk compared with traditional asset allocations using cap-weighted stock market indexes. Cap-weighted market portfolios resemble low-return, high-beta stocks and inherit their inefficiencies as wealth drivers.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@risk.net
