jmh530

Short Extension is a strategy between the Long-only strategy and Long-short market neutral (+futures and/or swaps) strategy. It's also called partial long-short strategy.

It earns its alpha and beta from a single source because the portfolio manager is usually thinking in terms of a single portfolio. The book also compares it with 100+30/30 strategy, whose alpha/beta are usually from two sources.

IMO, Short Extension is a strategy to extend the Long-only strategy by partially relaxing the long-only constraints, so the portfolio manager can make more efficient use of his information. Long-only Strategy has a single source, so does Short Extension strategy. Credit Suisse 130/30 is a live example.

--Hope I won't correct so many times on the exam day.



Edited 3 time(s). Last edit at Wednesday, April 13, 2011 at 10:58AM by deriv108.