Returning to Quality: An Empirical Investigation of Short Sale Constraints Effect on a Quality Investment Strategy
(2021) NEKP01 20211Department of Economics
- Abstract
- This paper examines an investment strategy relying on underlying characteristics of stocks and
how market efficiency drives its returns. By using the recently published quality-minus-junk factor
this paper attempts to explain the abnormal performance of portfolios sorted on their quality score
by using a natural experiment which interferes with market efficiency. Using data from the U.S.
and the SEC SHO pilot program it is shown that the returns associated with quality investing
is significantly affected by varying degrees of short sale constraint. This effect is negative in size
indicating that a quality investment strategy fares better in times of low market efficiency.
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9048988
- author
- Ingvarsson, Carl Johan LU
- supervisor
- organization
- course
- NEKP01 20211
- year
- 2021
- type
- H2 - Master's Degree (Two Years)
- subject
- keywords
- Quality, Portfolio performance, Difference-in-Difference, Short-sale constraints, Limits to arbitrage
- language
- English
- id
- 9048988
- date added to LUP
- 2021-07-05 13:21:43
- date last changed
- 2021-07-05 13:21:43
@misc{9048988, abstract = {{This paper examines an investment strategy relying on underlying characteristics of stocks and how market efficiency drives its returns. By using the recently published quality-minus-junk factor this paper attempts to explain the abnormal performance of portfolios sorted on their quality score by using a natural experiment which interferes with market efficiency. Using data from the U.S. and the SEC SHO pilot program it is shown that the returns associated with quality investing is significantly affected by varying degrees of short sale constraint. This effect is negative in size indicating that a quality investment strategy fares better in times of low market efficiency.}}, author = {{Ingvarsson, Carl Johan}}, language = {{eng}}, note = {{Student Paper}}, title = {{Returning to Quality: An Empirical Investigation of Short Sale Constraints Effect on a Quality Investment Strategy}}, year = {{2021}}, }