The Success of Long-Short Equity Strategies versus Traditional Equity Strategies & Market Returns

Author

Lauren J. Buchanan, Claremont McKenna CollegeFollow

Graduation Year

Fall 2011

Document Type

Open Access Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics

Reader 1

George Batta

Reader 2

Gregory Hess

Terms of Use & License Information

Terms of Use for work posted in Scholarship@Claremont.

Rights Information

© 2011 Lauren J. Buchanan

Abstract

This study examines the performance of long-short equity trading strategies from January 1990 to December 2010. This study combines two financial screens that will yield candidates for both long and short positions for each month during the aforementioned time period. Two long-short strategies are tested: (1) perfectly-hedged, or equal allocation to long and short positions, and (2) net-long. The results of this thesis reveal that if a long-short equity manager is able to successfully determine what companies are overvalued and undervalued and actively rebalance their portfolio, perfectly-hedged and net-long strategies can generate superior risk-adjusted alpha.

Recommended Citation

Buchanan, Lauren J., "The Success of Long-Short Equity Strategies versus Traditional Equity Strategies & Market Returns" (2011). CMC Senior Theses. 286.
https://scholarship.claremont.edu/cmc_theses/286