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

Authors

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

DOI:

https://doi.org/10.17811/ebl.10.1.2021.37-44

Keywords:

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

Abstract

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.

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Published

2021-02-21

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. https://doi.org/10.17811/ebl.10.1.2021.37-44

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Articles