什么是多空股权？

What is long and short equity?

Long-short equity is an investment strategy that seeks to establish a long position in stocks that are expected to appreciate in value and a short position in stocks that are expected to decrease in value. A long-short equity strategy seeks to capture the benefits of stock gains for long positions while reducing market risk, and profit from price declines for short positions. Although this is not always the case, the strategy should generally remain profitable on net returns.

Long-short equity is a more liquid alternative strategy favored by hedge funds, many of which employ a market-neutral strategy in which long and short positions are funded in equal amounts.

Key Points

• Long-short equity is an investment strategy that seeks to take long positions in undervalued stocks while selling short positions in overvalued stocks.
• Long-short equity is designed to enhance traditional one-sided long investing by exploiting profit opportunities among securities considered to be undervalued and overvalued.
• Long-short equity is often used by hedge funds, which tend to hold a relative long bias, such as a 130/30 strategy where the long exposure is 130% of AUM and the short exposure is 30%.

How long and short equity works

Long-short equity works by taking advantage of potential upside and downside profit opportunities in anticipated price movements. The strategy identifies and takes long positions in stocks that are considered relatively undervalued, while entering short trades in stocks that are considered overvalued.

While many hedge funds also employ long-short equity strategies and hold a long bias (such as 130/30, which has a long exposure of 130% and a short exposure of 30%), relatively few hedge funds employ a short bias in their long-short strategies. Because historically, uncovering profitable short ideas has generally been more challenging than long ideas.

Long-short equity strategies can be differentiated from each other in a number of ways – by market geography (developed economies, emerging markets, Europe, etc.), industry (energy, technology, etc.), investment philosophy (value or growth), etc.

An example of a long-short equity strategy with a broad mandate might be a global equity growth fund, while an example of a relatively narrow mandate might be an emerging markets healthcare fund.

Long-short equity and equity market neutrality

The key difference between long-short equity funds and equity market neutral (EMN) funds is that the latter attempt to take advantage of stock price differences by taking long and short positions in stocks with similar characteristics.

The EMN strategy attempts to keep the total value of its long and short positions roughly equal, which helps reduce overall risk. To maintain equivalence between longs and shorts, equity market-neutral funds must rebalance as market trends establish and strengthen.

So while other long-short hedge funds are letting their profits run and even leveraging up on market trends, equity market neutral funds are aggressively shrinking their gains and increasing the size of their relative positions. When the market inevitably turns again, equity market-neutral funds once again cut positions that should have been profitable and moved into more of their portfolios that were in the red.

Hedge funds that employ an equity market-neutral strategy are typically targeted at institutional investors looking for activist funds that can outperform bonds without taking on higher risk and higher returns.

Long and Short Equity Example: Pairs Trading

A common variation on the long-short model is a "pair trade," which involves offsetting a long position in one stock with a short position in another stock in the same industry.

For example, an investor in the technology space might take a long position in Microsoft and offset it with a short position in Intel. If an investor buys 1,000 shares of Microsoft at $33 a share while Intel trades at$22, the short portion of this pairing trade would involve purchasing 1,500 shares of Intel to equalize the long and short positions.

The ideal scenario for this long-short strategy is for Microsoft to appreciate and Intel to depreciate. If Microsoft rises to $35 and Intel falls to$21, the overall profit from this strategy will be $3,500. Even if Intel rises to$23 - since the factors that typically drive stocks up or down in a given industry are similar - this strategy would still be profitable at $500, albeit with a smaller profit.

To cope with the fact that stocks within the same industry generally tend to rise or fall together, long-short strategies often tend to use different industries for the long and short portions. For example, if interest rates rise, a hedge fund might short interest-rate-sensitive sectors such as utilities while holding long positions in defensive sectors such as health care.

About TheQuantHackers

TheQuantHackers is a cutting-edge community composed of a group of people from the world's top universities and quantitative finance practitioners, dedicated to exploring the infinite possibilities in the fields of artificial intelligence (AI) and quantification (Quant). Our team members come from world-renowned universities such as the University of Cambridge, Oxford University, Harvard University, ETH Zurich, Peking University, and the University of Science and Technology of China. Our external consultants come from first-class companies such as Microsoft, HSBC, Citadel, Man Group, Citi, Jump Trading, and top domestic private equity companies.