Relative Value Strategies

long, why, industry, relative, someone

Can someone explain to me why a hedged equity would not be considered a relative value strategy but convertible arbitrage and equity market neutral would be? To me hedged equity is long short except you're not long/short securities in the same industry like market neutral....

justin88

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发表于 2011-7-13 15:51 | 只看该作者

That's how i understood it too...thanks. I guess Schweser is wrong!

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ll11

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发表于 2011-7-13 15:51 | 只看该作者

Market neutral is relative value as you hedge out the systematic component and pick weaker / stronger ones (eg you are buying bank of America selling citi). Equity long short does not necessarily hedge out systematic risk (beta can be non-zero) so technically you're not making proper relative value trades

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Zestt

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发表于 2011-7-13 15:51 | 只看该作者

"Relative value, in which the manager seeks to exploit valuation discrepancies through long and short positions. This label may be used as a supercategory for, for example, equity market neutral, convertible arbitrage, and hedged equity."

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justin88