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Beta is a financial metric that measures the sensitivity of a stock’s returns in relation to the overall market. It provides insights into how much a stock tends to move in response to market fluctuations. A beta of 1 indicates the stock generally moves in line with the market, while a beta greater than 1 suggests higher volatility and a beta less than 1 implies lower volatility. A negative beta signifies an inverse relationship with the market. Investors often use beta to assess a stock’s risk and to make decisions about portfolio diversification based on their risk tolerance and market expectations.
Reference  examines the so-called beta anomaly in the international stock markets. The beta anomaly refers to the observed phenomenon where stocks with low beta outperform stocks with high beta over time. Some explanations for the beta anomaly include behavioral factors, investor preferences, and the impact of market frictions, suggesting that investors may overprice high-beta stocks and underprice low-beta stocks, leading to a persistent market anomaly.
The authors pointed out,
This research assesses the beta anomaly and investigates its relationship with stock quality in international stock markets. We document the existence of the beta anomaly in aggregate and country portfolios and show that stock quality can explain the beta anomaly…
This research offers novel evidence on the relationship between market risk and expected stock returns in international stock portfolios. The findings of this paper provide implications for investors. An investment strategy that is long in low-beta stocks and short in high-beta stocks will generate economically and statistically significant abnormal returns and Sharpe ratio in aggregate and most country portfolios. However, those profits are restricted to low-quality stock portfolios and become insignificant within high-quality stock portfolios. The abnormal returns of a low-high beta portfolio almost double once estimated among junk stocks only. This study suggests that arbitrage opportunities are possible at both the aggregate and country levels and that stock quality should be taken into account to exploit the beta anomaly.
In brief, the beta anomaly is present in the international stock market and among low-quality stocks.
We believe that the U.S. investors aren’t diversifying internationally enough. This paper offers guidance on how they can diversify in international stock markets.
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 Bradrania, R., Veron, J.F., & Wu, W. (2023). The beta anomaly and the quality effect in international stock markets. Journal of Behavioral and Experimental Finance 38, 1-18., https://ssrn.com/abstract=4414410
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