Skip to main content

LUP Student Papers

LUND UNIVERSITY LIBRARIES

Returning to Quality: An Empirical Investigation of Short Sale Constraints Effect on a Quality Investment Strategy

Ingvarsson, Carl Johan LU (2021) NEKP01 20211
Department 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:
author
Ingvarsson, Carl Johan LU
supervisor
organization
course
NEKP01 20211
year
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}},
}