Costly Long‐Short Strategies Under Short‐Sale Constraints: Chinese Evidence
9 Pages Posted: 7 Dec 2018
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Costly long-short strategies under short-sale constraints: Chinese Evidence
Date Written: December 2018
Abstract
Long‐short portfolios based on market anomalies are subject to ubiquitous short‐sale constraints. Few studies directly quantify the impact of shorting on long‐short strategies, largely due to the complexity of the shorting practice. We examine the Chinese market, in which the scope of the short‐sale constraint and the shorting cost are clearly specified. Among size, value, and momentum strategies, we find that only size earns significant profits before short‐sale constraints are considered. Imposing the scope of short‐sale constraint by selling only shortable stocks does not materially change the profits. Deducting shorting costs, however, essentially wipes off all the profits of long‐short portfolios.
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Costly Long‐Short Strategies Under Short‐Sale Constraints: Chinese Evidence
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