High Beta Analysis

Even the best go down in a reflation market!

I was wondering why my high beta stock systems are that strong in the long term (even very volatile):

What I read in academic papers is:

High Beta is one of the best trending factors (if up with relative strength that is predictive!).

Furthermore, there is a strategy of academics called “betting against high beta” (BAB), that shorts the highest beta names and goes long lower beta names.

The above strategy are high beta names that are the strongest ones!

The below strategy is a high beta stock trading system, that picks high beta stocks, weights them by high beta (the highest beta stocks get the biggest weight) and which have bad earnings estimate revisions:

So now I understand that the academic strategy bet against high beta works!

But the most important point is: If you buy $ARKK names now, you buy the factors of the above (second picture!) strategy, because those ARKK names not only have a very high beta into a regime that is extremely bad for high beta stocks (Reflation!) but they have (almost all) bad earnings revisions. Do not buy any dips on high beta stuff!

Be in cash or have an ETF Portfolio with longs and shorts fitting the regime:

Have a great week!

Disclaimer: For educational purpose only. Not investment advice. Seek professional advice from a financial advisor before making any investing decisions.