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

  title={Equity Factors: To Short Or Not To Short, That Is The Question.},
  author={Florent Benaych-Georges and Jean-Philippe Bouchaud and Stefano Ciliberti},
  journal={arXiv: Portfolio Management},
  • Florent Benaych-Georges, Jean-Philippe Bouchaud, Stefano Ciliberti
  • Published 2020
  • Economics
  • arXiv: Portfolio Management
  • 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… CONTINUE READING