Chasing returns with high-beta stocks: evidence from tax-privileged mutual funds in Thailand


  • Roongkiat Ratanabanchuen Chulalongkorn Business School
  • Kanis Saengchote Chulalongkorn Business School



high-beta stocks, mutual funds, low-beta anomaly


One proposed explanation for the low-beta anomaly – a puzzling finding that stocks with low systematic risk tend to earn higher returns than the CAPM predicts and vice versa – is that mutual funds drive up demand for high-beta stocks, leading to systematic mispricing. We find evidence that Thai equity mutual funds tend to alter their risk exposure in response to fund flows, but only for incentivized funds where investors receive immediate tax benefits. We argue that the benefits change the way investors make their decisions, raising an issue of how public policies may have unintended consequences in capital markets.


Arif, S., Ben-Rephael, A., & Lee, C. (2015). Do short-sellers profit from mutual funds? evidence from daily trades. Rock Center for Corporate Governance at Stanford University Working Paper, 195.

Badding, K. D., Stephenson, E. F., & Yeoh, M. M. (2012). Health-care reform and bankruptcy: evidence from Massachusetts. Applied Economics Letters, 19(17), 1741-1744.

Baker, M., Bradley, B., & Wurgler, J. (2011). Benchmarks as limits to arbitrage: Understanding the low-volatility anomaly. Financial Analysts Journal, 67(1), 40-54.

Black, F. (1972). Capital market equilibrium with restricted borrowing. The Journal of Business, 45(3), 444-455.

Boguth, O., & Simutin, M. (2018). Leverage constraints and asset prices: Insights from mutual fund risk taking. Journal of Financial Economics, 127(2), 325–341.

Brown, K. C., Harlow, W. V., & Starks, L. T. (1996). Of tournaments and temptations: An analysis of managerial incentives in the mutual fund industry. The Journal of Finance, 51(1), 85-110.

Chevalier, J., & Ellison, G. (1997). Risk taking by mutual funds as a response to incentives. Journal of Political Economy, 105(6), 1167-1200.

Christoffersen, S. E., & Simutin, M. (2017). On the demand for high-beta stocks: Evidence from mutual funds. The Review of Financial Studies, 30(8), 2596-2620.

Frazzini, A. and L. H. Pedersen (2014). Betting against beta. Journal of Financial Economics, 111(1), 1–25.

Gallet, C. A. (2013). Tobacco control and obesity: evidence from a cross section of countries. Applied Economics Letters, 20(1), 80-83.

Ha, Y., & Ko, K. (2017). Why do fund managers increase risk?. Journal of Banking & Finance, 78, 108-116.

Huang, J., Wei, K. D., & Yan, H. (2007). Participation costs and the sensitivity of fund flows to past performance. The Journal of Finance, 62(3), 1273-1311.

Muthitacharoen, A. (2017). Five new perspectives from Thai tax returns. PIER aBRIDGEd, 19.

O’Donoghue, T., & Rabin, M. (2015). Present bias: Lessons learned and to be learned. American Economic Review, 105(5), 273-79.

Sirri, E. R., & Tufano, P. (1998). Costly search and mutual fund flows. The Journal of Finance, 53(5), 1589-1622.

Stambaugh, R. F., Yu, J., & Yuan, Y. (2012). The short of it: Investor sentiment and anomalies. Journal of Financial Economics, 104(2), 288-302.

Stambaugh, R. F., Yu, J., & Yuan, Y. (2015). Arbitrage asymmetry and the idiosyncratic volatility puzzle. The Journal of Finance, 70(5), 1903-1948.

Virabhak, S., & Sohn, W. (2009). The impact of Medicaid's preferred drug lists on physicians' prescribing behaviour. Applied Economics, 41(21), 2705-2725.




How to Cite

Ratanabanchuen, R., & Saengchote, K. (2021). Chasing returns with high-beta stocks: evidence from tax-privileged mutual funds in Thailand. Economics and Business Letters, 10(1), 37–44.