THE CHARPIN–LACAZE RESPONSE TO C. C. Y. KWAN'S PAPER "LONG-SHORT PORTFOLIO MODELING: CRITIQUE AND EXTENSION"

Françoise Charpin () and Dominique Lacaze ()
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Françoise Charpin: OFCE 69, quai d'Orsay, 75007 Paris, France
Dominique Lacaze: UFR de Sciences Economiques et de Gestion, Université de Paris X-Nanterre 200, avenue de la République, 92001 - Nanterre cedex, France

International Journal of Theoretical and Applied Finance (IJTAF), 2004, vol. 07, issue 01, 19-23

Abstract: With this note, we refute Kwan's criticism. On one hand, the choice of an inequality budget constraint allows us, for μ greater than μ0, to study the useful part of the efficient frontier. On the other hand, the assumption that the cost of constructing long-short portfolios is positive, seems quite reasonable when transactions costs are included. Finally, we consider Kwan's revised model and explain why his formulation does not work.

Keywords: Equity; long-short; strategies (search for similar items in EconPapers)
Date: 2004
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DOI: 10.1142/S0219024904002293

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