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

Susan E. K. Christoffersen, Mikhail Simutin

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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.
TidsskriftThe Review of Financial Studies
Udgave nummer8
Sider (fra-til)2596-2620
Antal sider25
StatusUdgivet - aug. 2017

Bibliografisk note

Published online: 04 April 2017