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 document that stocks that experience sudden increases in idiosyncratic volatility underperform otherwise similar stocks in the future, and we propose that this phenomenon can be explained by the Miller (1977) conjecture. We show that volatility shocks can be traced to the unusual firm-level...