Increasing Implementation Efficiency by Relaxing the Long-Only Constraint in Enhanced Index Portfolios

Abstract

This article addresses some of the common implementation issues surrounding portfolio extension strategies. More specifically, it explains how short selling may add to portfolio performance and why the strategy need not significantly increase portfolio risk. Although selling stocks short may not increase portfolio risk, there remains a number of implementation issues that investors need to be aware of before relaxing the long-only constraint.

TOPICS: Mutual funds/passive investing/indexing, portfolio construction, equity portfolio management