This article examines whether industry plays a role in explaining the negative beta-return relation. Using the two-beta model, I isolate the risk exposed to an affiliated industry (i.e., industry beta) from the risk exposed to the rest of the market (i.e., market beta). I find that the industry beta is statistically and economically significant, and its cross-sectional variation is closely associated with the beta anomaly. In addition, overvaluation at the industry level appears to cause the beta anomaly. While the risk-return relation is negative in industry booms, it is positive in industry busts. In contrast, the beta anomaly disappears at the rest-of-the-market level, and the long-short strategy based on the market beta earns positive alphas after controlling for industry beta, consistent with the prediction of the asset pricing theory. In sum, I propose that industry booms and busts are another potential mechanism which is responsible for the failure of the CAPM.