Beta Anomalies in Scandinavian Financial Markets

Abstract

In our master thesis, we build upon the works of Pedersen and Frazzini to study the beta anomaly. We first replicate their method for constructing the BAB factors in Norway, Sweden, and Denmark. Then we adjust our assumptions to account for criticism the original paper has gotten over the years. We find results that indicate the existence of the proposed beta anomaly, however primarily for stocks above a certain level of market capitalisation. We conclude that the difference between lowbeta alpha and high-beta alpha is generally insignificant, but investors can profit from the betting against beta strategy in Norway and Sweden, but not Denmark.