This study investigates, with a critical approach, if portfolios consisting of high beta stocks yields more than portfolios consisting of low beta stocks in the Swedish stock exchange market. The chosen period is 1999-2016, covering both the DotCom Bubble and the financial crisis of 2008. We also investigate if the Capital Asset Pricing Model is valid by doing a test similar to Fama and Macbeth’s of 1973. Based on earlier studies in the field and our own study we come to the conclusion that high beta stocks does not outperform low beta stocks in the Swedish stock market 1999-2016. We believe that this relationship arises from inefficiencies in the market and irrational investing. By doing this study we observe that, the use of beta as the only risk factor for explaining expected returns on stocks or portfolios is not correct.

Previous research conducted on the US markets has found that retailers' trading imbalances can contribute to excess return opportunities, especially on Small Cap stocks. Therefore, we argue that this can be seen as an anomaly. However, anomalies that are found historically may not tell the whole truth. This is because these anomalies have been established on respective studies' specific markets and time periods. Researchers that have investigated the issue argue that it is essential to further challenge anomalies by replicating them in other settings to see if the evidence still holds. Hence, the purpose of this study is to examine if the retailers' trading imbalance anomaly can be replicated on Swedish Small Cap listed firms. We have examined this by using cross-sectional regressions in the spirit of Fama and MacBeth. This thesis concludes that the retailers’ trading imbalances cannot be replicated when applied to the chosen setting. We argue that the reasons for this are that retailers’ trading imbalances are not persistent, are not compensated when providing liquidity into the markets, and that it does not contain useful information about future stock returns. In addition, we also argue that inherent differences in the US markets compared to the Swedish Small Cap listed firms are affecting our possibility to successfully replicate the anomaly.