On the Optimality of Long-Short Strategies

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1、OntheOptimalityofLong–ShortStrategiesBruceI.Jacobs,KennethN.Levy,andDavidStarerWeconsidertheoptimalityofportfoliosnotsubjecttoshort-sellingconstraintsandderiveconditionsthatauniverseofsecuritiesmustsatisfyforanoptimalactiveportfoliotobedollarneutralorbetaneutral.Wefi

2、ndthatfollowingthecommonpracticeofconstraininglong–shortportfoliostohavezeronetholdingsorzerobetasisgenerallysuboptimal.Onlyunderspecificunlikelyconditionswillsuchconstrainedportfoliosoptimizeaninvestor’sutilityfunction.Wealsoderivepreciseformulasforoptimallyequitizi

3、nganactivelong–shortportfoliousingexposuretoabenchmarksecurity.Therelativesizesoftheactiveandbenchmarkexposuresdependontheinvestor’sdesiredresidualriskrelativetotheresidualriskofatypicalportfolioandontheexpectedrisk-adjustedexcessreturnofaminimum-varianceactiveportfo

4、lio.Wedemonstratethatoptimalportfoliosdemandtheuseofintegratedoptimizations.heconstructionandmanagementofresentsaseparateassetclass.Thismisconceptionislong–shortportfoliosarecomplicatedcommon.Forexample,Brush(1997)describedaTtasksinvolvingassumptionsandactionstechniq

5、ueforoptimallyblendingalong–shortport-thatmayseemcounterintuitivetothefoliowithalong-onlyportfoliotoachieveanoverallinvestorunfamiliarwithshorting.DespiteportfoliothathasagreaterSharperatiothaneitherattemptsbyJacobsandLevy(1996b,1997)toclarifyofitsconstituentportfoli

6、os.Insodoing,Brushtheissues,manypractitioners—evensomeoftheimplicitlyassignedlong–shortandlong-onlyport-mostexperienced—havebeenbeguiledbyanfoliostodifferentassetclasses.Althoughthisblend-assemblageofmythsandmisconceptions.Withingapproachappearstoacknowledgethebenefi

7、tslong–shortstrategybecominganincreasinglyoflong–shortinvestment,itmissesthepointsthataimportantcomponentofinstitutionalportfolios,1long–shortportfoliodoesnotbelongtoaseparatesomeofthemoreegregiousmisunderstandingsassetclassandthatcombiningalong–shortportfoliomustbep

8、urgedfromthecollectivepsycheofthewithalong-onlyportfolioproduces(intheaggre-investmentcommunity.gate)onlyasingleportfolio!Theoptima