No alpha in hedge funds’ average short positions – research
A strategy betting against low conviction shorts beat a benchmark model by 6% in back tests
The best way to make money from hedge funds’ short ideas may be to bet against them.
Piggybacking on the ‘best ideas’ of hedge fund managers is a popular strategy among exchange-traded funds that aim to replicate their returns. But when researchers tested a similar strategy using data on hedge funds’ favourite short ideas, they found it was more profitable to trade against the managers than with them.
“Our findings are consistent with investors not having an informational edge as far as shorts
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