Long/Short Equity Investing

Abstract

Investors who have the flexibility to invest both long and short can benefit from both “winners” and “losers.” This will be especially advantageous if the latter — the short-sale candidates — are less efficiently priced than the winners — the purchase candidates. This is likely to be the case in markets in which investors hold diverse opinions and short selling is restricted. Short positions can be combined with long positions to create market-neutral, hedge, or equitized strategies. Practical issues include restrictions on shorting, trading requirements, custody issues, and tax treatment.

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