Report
Reaching for beta
Discussion paper (Centre for Economic Policy Research (Great Britain)), no. 20812, Centre for Economic Policy Research
11/04/2025
Abstract
Using equity mutual fund holdings and transactions, we show that managers actively tilt toward high-beta stocks when monetary policy is contractionary and short rates rise. This "reaching for beta" is persistent, elevates sector-wide net buying of high-beta stocks, and attracts fund inflows under tighter policy. It raises funds' raw but not risk-adjusted returns and induces temporary stock-level price pressure that subsequently reverts. We show that reaching for beta is consistent with fund managers counteracting investor outflows by boosting expected returns. Unlike reaching for yield in bonds, tighter policy increases risk-taking in equities, revealing a beta channel of monetary policy transmission.
Includes bibliographical references (pages 50-55).
Details
- Title: Subtitle
- Reaching for beta
- Creators
- Egemen GencEmanuel MönchAltan Pazarbasi
- Resource Type
- Report
- Series
- Discussion paper (Centre for Economic Policy Research (Great Britain)); no. 20812
- Publisher
- Centre for Economic Policy Research; London
- Number of pages
- 55, 16 pages
- Language
- English
- Date published
- 11/04/2025
- Academic Unit
- Finance
- Record Identifier
- 9985064648702771
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