The Performance of the 130/30 Strategy in the Australian Equities Market

53 Pages Posted: 31 Jul 2008 Last revised: 26 Feb 2009

See all articles by Alex Frino

Alex Frino

The University of Sydney - Discipline of Finance; Financial Research Network (FIRN)

Elvis Jarnecic

The University of Sydney; Financial Research Network (FIRN)

Abhishek Das

The University of Sydney

Date Written: July 27, 2008

Abstract

This paper empirically tests two 130/30 strategies using the top 50 stocks listed on the Australian Stock Exchange: a momentum returns driven 130/30 strategy, and a fundamental value based 130/30 strategy. The performance of these enhanced active strategies is evaluated, against traditional buy and hold strategies used by long-only managers as well as naive investments in market indices, over an eight year period with quarterly rebalancing. The results of back-testing and out of sample simulations reveal that momentum driven 130/30 strategies can earn significant alpha over a long investment horizon. The 130/30 portfolios also have higher information ratios and earn higher risk-adjusted returns compared to their long only counterparts.

Keywords: Long/Short Equity, 130/30, Active Extension, Hedge Funds, Momentum, Value-based, Australia

JEL Classification: G11, G23

Suggested Citation

Frino, Alex and Jarnecic, Elvis and Das, Abhishek, The Performance of the 130/30 Strategy in the Australian Equities Market (July 27, 2008). 21st Australasian Finance and Banking Conference 2008 Paper, Available at SSRN: https://ssrn.com/abstract=1181363 or http://dx.doi.org/10.2139/ssrn.1181363

Alex Frino

The University of Sydney - Discipline of Finance ( email )

Futures Research Centre
P.O. Box H58
Sydney NSW
Australia
+61 2 9299 1809 (Phone)
+61 2 9299 1830 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Elvis Jarnecic

The University of Sydney ( email )

University of Sydney
Sydney, NSW 2006
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Abhishek Das (Contact Author)

The University of Sydney ( email )

University of Sydney
Sydney, NSW 2006
Australia

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