Can the Factor Zoo Survive Shorting Costs?
Event details
| Date | 30.10.2026 |
| Hour | 11:00 › 12:15 |
| Speaker | Raman Uppal - EDHEC |
| Location |
UNIL, Extranef, room 126
|
| Category | Conferences - Seminars |
| Event Language | English |
Victor DeMiguel (LBS), Alberto Martın-Utrera (Iowa State University), Simon Rottke (University of Amsterdam), Raman Uppal (EDHEC and CEPR)
Muravyev, Pearson, and Pollet (2025) find that shorting fees eliminate the average anomaly. We show this result reverses when an investor combines many characteristic portfolios, because a stock that one characteristic portfolio sells short is often a stock that another buys. An equally weighted combination of 184 characteristic portfolios needs about one-fifth of their short positions in isolation and pays about one-quarter of their shorting costs. Net of shorting fees, a mean-variance combination earns out-of-sample Sharpe ratios of 1.28 over 1980–2024 and 1.12 over 2005–2024, against 0.55 and 0.62 for the market. Without netting, it fails to beat the market.
Muravyev, Pearson, and Pollet (2025) find that shorting fees eliminate the average anomaly. We show this result reverses when an investor combines many characteristic portfolios, because a stock that one characteristic portfolio sells short is often a stock that another buys. An equally weighted combination of 184 characteristic portfolios needs about one-fifth of their short positions in isolation and pays about one-quarter of their shorting costs. Net of shorting fees, a mean-variance combination earns out-of-sample Sharpe ratios of 1.28 over 1980–2024 and 1.12 over 2005–2024, against 0.55 and 0.62 for the market. Without netting, it fails to beat the market.
Practical information
- Informed public
- Free