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Academic audit

Failedcountry index low-beta

Betting Against Beta Factor In Country Equity Indexes

Le parcours des trois portes · authentique seulement s’il passe les trois et survit à la réfutation adversariale
Gate 1
Sans biais de survivance
free
panel propre
Éliminé ici
Gate 2
Placebo ≥ P95
P1
devance ~2 paniers sur 200
Gate 3
Net après coûts
RF -0.93
net négatif après coûts
Échec
Pire jambe sur 12 mois (RF)-0.86
plancher −1.000
Chaque stratégie ici — gagnantes incluses — perd sur ses pires 12 mois. La profondeur est un contexte honnête, pas le verdict.
Rejeté à la porte de la chance — son net ne fait pas mieux que des paniers aléatoires (sous la ligne de compétence P95).

Betting-against-beta buys low-beta assets and shorts high-beta ones, betting that the low-beta side earns a better risk-adjusted return. This is the country-index version of the Frazzini & Pedersen (2014) factor.

What we found

In our test the country-index BAB variant did not produce genuine rank skill. It sits at the 1st percentile of random baskets (placebo percentile 1), with a negative risk-adjusted RF of -0.93 and a worst-year RF of -0.86 — the same beta-bleed problem as the single-stock version. The result is consistent with residual short-beta exposure losing money over the window rather than a real low-beta premium, so we classify it as failed.

How we tested it
2005–2026 test windowmodelled liquidity-aware costssurvivorship free
  • Data: survivorship-free 1077-name US common-stock panel, 2005-2026. Realistic modelled costs.
  • Placebo / robustness test: real result vs random baskets or shuffled signals (real vs the 95th percentile of random)
Source: Frazzini & Pedersen (2014), country-index version
Read the paper ↗
← The Academic Audit — all 54 studies

Research, not investment advice. “Validated” factor-legs are market-neutral diversifying building blocks with a losing worst year — none is a standalone tradeable strategy. Metrics are cost-aware and modelled (not live fills); the 2005–2026 test window is out-of-sample versus the source paper. Dollar figures are not returns and are omitted by design.