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| Type | Master's Thesis |
| Scope | Discipline-based scholarship |
| Title | Betting Against Beta in Switzerland |
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| Institution | University of Zurich |
| Faculty | Faculty of Business, Economics and Informatics |
| Number of Pages | 41 |
| Date | 2020 |
| Abstract Text | This thesis firstly investigates the low-beta anomaly in Switzerland. After having verified an empirical SML flatter than the one predicted by the classic CAPM, this thesis applies in the Swiss market, the dynamic model with borrowing constraints and margin requirements, developed by Frazzini and Pedersen (2014). Almost all empirical results are consistent with the model central predictions: (1) low-beta portfolios have a higher alpha than high-beta ones while their exhibits a comparable average excess return. (2) A zero-beta self-financing portfolio that is long leveraged in low-beta stocks and shorts the high-beta ones, called betting against beta (BAB) factor, produces significant positive risk-adjusted returns. (3) Stocks’ betas are compressed toward one when funding liquidity risk increases. Moreover, this thesis finds that the introduction in late 2011 of the CHF/EUR peg has had a negative impact on the BAB performance. However, the empirical results do not confirm statistically the relationship between the strong BAB performance and borrowing constraints. |
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