Shu Chen, Zhuo Huang, and Zhimin Qiu
The beta anomaly indicates that high-beta stocks earn low future excess returns. We first prove the existence of the beta anomaly in the Chinese A-share stock market and then explain this anomaly based on short-sale constraints and aggregate disagreement. We provide a new proxy for aggregate disagreement based on analysts’ earnings forecasts and find that the beta anomaly does not exists in stocks with no short-sale constraints and periods with low aggregate disagreement. Furthermore, the higher level of aggregate disagreement is associated with a more concave Security Market Line and a more significant beta anomaly.
Keywords: Beta anomaly; Heterogeneous beliefs; Disagreement; Analyst forecast; short-sale constraints.
JEL Classification Number: G11, G12.
 Shu Chen is PhD student at National School of Development, Peking University, Beijing, China. E-mail: email@example.com. Zhuo Huang is Associate Professor in Economics at the National School of Development, Peking University, Beijing, China. E-mail: firstname.lastname@example.org. Zhimin Qiu (corresponding author) is PhD student at National School of Development, Peking University, Beijing, China. E-mail: email@example.com. This research is supported by National Natural Science Foundation of China (71671004, 71871060).