We’re using cookies, but you can turn them off in Privacy Settings. Otherwise, you are agreeing to our use of cookies. Learn more in our Privacy Policy.


Contrary to basic finance principles, high-beta and high-volatility stocks have long underperformed low-beta and low-volatility stocks. This anomaly may be partly explained by the fact that the typical institutional investor’s mandate to beat a fixed benchmark discourages arbitrage activity in both high-alpha, low-beta stocks and low-alpha, high-beta stocks.

About the Author(s)

Malcolm Baker
Brendan Bradley
Jeffrey Wurgler

Jeffrey Wurgler is professor of finance at New York University Stern School of Business and research associate at the National Bureau of Economic Research, Cambridge, Massachusetts.