Do Long-Short and Market Neutral Mutual Funds Sail on Even Keel?

The Journal of Investing Winter 2017, 26 (4) 69-80; DOI:10.3905/joi.2017.26.4.069

27 Pages Posted: 19 Jun 2020

See all articles by John C. Adams

John C. Adams

University of Texas at Arlington

Parvez Ahmed

University of North Florida - Coggin College of Business

Sudhir Nanda

affiliation not provided to SSRN

Date Written: September 7, 2016

Abstract

Long-short and market neutral funds seek superior risk-adjusted returns while limiting their exposure to stock market risk. Over the 1999 to 2013 period the number of funds with these investment objectives increased by over 700 percent. Despite their growing popularity, we find that long-short and market neutral deliver lower risk-adjusted returns than U.S. Treasuries. Our investigation also reveals that the returns of both types of funds are positively and significantly correlated with the stock market. However, both fund types perform better in down markets. Finally, we report that market-neutral funds outperform long-short funds.

Keywords: Active Alts, Long-Short, Market Neutral

JEL Classification: G1,G2

Suggested Citation

Adams, John C. and Ahmed, Parvez and Nanda, Sudhir, Do Long-Short and Market Neutral Mutual Funds Sail on Even Keel? (September 7, 2016). The Journal of Investing Winter 2017, 26 (4) 69-80; DOI:10.3905/joi.2017.26.4.069, Available at SSRN: https://ssrn.com/abstract=3611009 or http://dx.doi.org/10.2139/ssrn.3611009

John C. Adams (Contact Author)

University of Texas at Arlington ( email )

Box 19449 UTA
Arlington, TX 76019
United States
904-476-2946 (Phone)

Parvez Ahmed

University of North Florida - Coggin College of Business ( email )

4567 St. Johns Bluff Road, South
Jacksonville, FL 32224-2645
United States

Sudhir Nanda

affiliation not provided to SSRN

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