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Beta Bubbles

SSRN Electronic Journal
2017
  • 0
    Citations
  • 3,718
    Usage
  • 5
    Captures
  • 0
    Mentions
  • 0
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Usage
    3,718
    • Abstract Views
      3,242
    • Downloads
      476
  • Captures
    5
  • Ratings
    • Download Rank
      120,982

Article Description

We show that an increase in a stock’s breadth of institutional ownership or turnover is followed by a significant but temporary increase in its CAPM beta estimate and a decrease in its CAPM alpha. The increasing effect of breadth of ownership on beta estimates strengthens if we classify institutional investors by their historical trading horizon and look at the effect of changes in the ownership breadth of short-horizon institutional investors. These transitory, trading activity-driven components of beta estimates that we find contribute to the empirical failure of the CAPM and the large returns to long-short portfolios that bet against beta. In addition, the relations between ownership breadth, turnover and betas that we document help explain the puzzling fact that on average betas increase after seasoned equity offerings and stock splits, and decrease after stock repurchases.

Bibliographic Details

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