Equity Factors: To Short Or Not To Short, That Is The Question

Florent Benaych-Georges, Jean-Philippe Bouchaud and Stefano Ciliberti

Papers from arXiv.org

Abstract: What is the best market-neutral implementation of classical Equity Factors? Should one use the specific predictability of the short-leg to build a zero beta Long-Short portfolio, in spite of the specific costs associated to shorting, or is it preferable to ban the shorts and hedge the long-leg with -- say -- an index future? We revisit this question by focusing on the relative predictability of the two legs, the issue of diversification, and various sources of costs. Our conclusion is that, using the same Factors, a Long-Short implementation leads to superior risk-adjusted returns than its Hedged Long-Only counterpart, at least when Assets Under Management are not too large.

Date: 2020-03, Revised 2021-04
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2003.10419 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2003.10419

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().