The low (high) abnormal returns of stocks with high (low) beta - the beta anomaly - is one of the most persistent anomalies in empirical asset pricing research. This paper demonstrates that investors' demand for lottery-like stocks is an important driver of the beta anomaly. The beta anomaly is...

We introduce a technology that estimates basis assets and thus the cost of capital. The generalized basis assets technology groups firms together into homogeneous risk classes which share the same systematic risk and therefore the same, commensurate, systematic return. By knowing a firm's risk...