Hooman Abdollahi - Department of Industrial Engineering, Karaj Branch, Islamic Azad University, Karaj, Iran.
Seyed Babak Ebrahimi - Department of Industrial Engineering, K. N. Toosi University of Technology, Tehran, Iran
Hamed Tayebi - Department of Industrial Engineering, Karaj Branch, Islamic Azad University, Karaj, Iran.

While the positive relationship between beta of a stock and its future return is implied by CAPM, empirical literature does not support this proposition. The recent advancements in risk-return relationship have documented the beta anomaly, or better still betting against beta, as the most complicated anomaly in finance. In this paper, the authors study the robustness of betting against beta phenomenon in the stock market via investigating it on absolute return and risk-adjusted basis using US market data over the period 1984-2012. To do this, beta-sorted quintile portfolios are used to estimate beta beside four multi-factor models. The results obtained provide evidence for existence of betting against beta on risk-adjusted basis only. Implications, discussion, and future research directions are discussed at the end of the paper.

Systematic Risk; Beta; Abnormal risk-return relationship; CAPM; Financial engineering