“Alpha Extension” extended to emerging markets
| Feb 28th, 2010 | Filed under: Academic Research, Guest Posts, Today's Post | By: Guest |
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Advocates of “short-extension” or “alpha-extension” strategies such as 130/30 funds often point out that traditional long-only managers are only able to bet against a stock by as much as that stock represents in the benchmark index. After all, they argue, you can do no more than simply deciding not to hold a stock at all.
This logic applies in spades to emerging markets, where indexes are just as concentrated, if not more so. In today’s installment of our “Alternative Viewpoints” column by Aquico Wen, a member of the CAIA Association, and Young Chow of Esemplia, a subsidiary of Legg Mason, we show how removing the long-only constraint can have an even more dramatic effect on emerging-market managers than on managers in more mature markets. More…
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