Although “betting against beta” with government bonds (BABgov) seems profitable,
questions remain. First, to what extent are BABgov profits an anomaly? Previous studies do not
address routine valuation frameworks, such as term-structure models or principal components
analysis. Second, “low” in low-risk investing refers to the second, not third,
moment of returns, and prior research does not address coskew preferences. To consider the
third question—breadth—I examine 20 non-US markets. On balance, BABgov is found to
produce alpha, but primarily for the United States and with substantial systematic risk.
Investors should follow BABgov cautiously.
Read the Complete Article in Financial Analysts Journal
Financial Analysts Journal
CFA Institute Member Content
29 pages doi.org/10.2469/faj.v72.n6.5ISSN/ISBN: 0015-198X
Functional cookies, which are necessary for basic site functionality like keeping you logged in, are always enabled.