The DOI matches its Crossref record; 4 of the 4 references it cites were found in a registry or an index.
Bad Beta, Good Beta
Abstract
This paper explains the size and value “anomalies” in stock returns using an economically motivated two-beta model. We break the beta of a stock with the market portfolio into two components, one reflecting news about the market's future cash flows and one reflecting news about the market's discount rates. Intertemporal asset pricing theory suggests that the former should have a higher price of risk; thus beta, like cholesterol, comes in “bad” and “good” varieties. Empirically, we find that value stocks and small stocks have considerably higher cash-flow betas than growth stocks and large stocks, and this can explain their higher average returns. The poor performance of the capital asset pricing model (CAPM) since 1963 is explained by the fact that growth stocks and high-past-beta stocks have predominantly good betas with low risk prices.
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Citations
Cites
Common risk factors in the returns on stocks and bonds
Fama, E. F., & French, K. R. (1993) · Journal of Financial Economics · doi:10.1016/0304-405x(93)90023-5 · Cited by 25,754
CAPITAL ASSET PRICES: A THEORY OF MARKET EQUILIBRIUM UNDER CONDITIONS OF RISK*
Sharpe, W. F. (1964) · The Journal of Finance · doi:10.1111/j.1540-6261.1964.tb02865.x · Cited by 19,441
Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency
JEGADEESH, N., & TITMAN, S. (1993) · The Journal of Finance · doi:10.1111/j.1540-6261.1993.tb04702.x · Cited by 11,584
FAMA, E. F. (1991) · The Journal of Finance · doi:10.1111/j.1540-6261.1991.tb04636.x · Cited by 5,350
Cited by
What explains the stock market’s reaction to federal reserve policy?
BERNANKE, B. S., & KUTTNER, K. N. (2005) · The Journal of Finance · doi:10.1111/j.1540-6261.2005.00760.x · Cited by 2,384
… and the Cross-Section of Expected Returns
Harvey, C. R., Liu, Y., & Zhu, H. (2016) · Review of Financial Studies · doi:10.1093/rfs/hhv059 · Cited by 2,119
Investor Sentiment Aligned: A Powerful Predictor of Stock Returns
Huang, D., Jiang, F., Tu, J., & Zhou, G. (2015) · Review of Financial Studies · doi:10.1093/rfs/hhu080 · Cited by 1,123
Market expectations in the cross-section of present values
KELLY, B., & PRUITT, S. (2013) · The Journal of Finance · doi:10.1111/jofi.12060 · Cited by 584
Is accruals quality a priced risk factor?
Core, J. E., Guay, W. R., & Verdi, R. (2008) · Journal of Accounting and Economics · doi:10.1016/j.jacceco.2007.08.001 · Cited by 412
Metadata
- Authors
- Campbell, J. Y., & Vuolteenaho, T.
- Venue
- American Economic Review
- Publisher
- American Economic Association
- Published
- 2004-12-01
- Volume
- 94
- Issue
- 5
- Pages
- 1249-1275
- ISSN
- 0002-8282 (ISSN-L)
- OpenAlex
- W3124536539
- Cited by
- 1,125
- References
- 4
- FWCI
- 62.69
- Type
- journal article
- Language
- en
- Open access
- closed
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Data sources
Bibliographic data: Semantic Scholar, OpenAlex, Crossref.
Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
