Using portfolios that are formed by directly sorting stocks based on their exposure to characteristics-based factors, earlier studies find that these beta-sorted portfolios have very large ex post factor beta spreads. However, the return spreads between high- and low-beta firms are typically...

This study explores the role of investor sentiment in a broad set of anomalies in cross-sectional stock returns. We consider a setting where the presence of market-wide sentiment is combined with the argument that overpricing should be more prevalent than underpricing, due to short-sale...