Equity Market Neutral

Core idea

Equity market neutral portfolios combine long and short stock positions while targeting low net market beta. Returns are intended to come from stock selection and factor control rather than the equity market’s direction.

Implementation

Alpha forecasts must survive factor neutralization, borrow fees, corporate actions, and portfolio turnover.

Primary risk

Crowded positions and common factor shocks can make both sides lose at the same time.

Frequently asked questions

What is equity market neutral?

Equity market neutral portfolios combine long and short stock positions while targeting low net market beta. Returns are intended to come from stock selection and factor control rather than the equity market’s direction.

What is the main risk of equity market neutral?

Crowded positions and common factor shocks can make both sides lose at the same time.