Abstract
This study examines the performance of several active extension strategies, commonly known as 130/30, in the Australian equities market. A detailed analysis of the factors affecting performance is explored using Monte Carlo simulations based on eight years of historical returns for the constituents of the S&P/ASX 200 index under a variety of realistic cost assumptions. We find evidence of a statistically significant increase in performance of active extension strategies over equivalent long-only portfolios, holding all other factors constant. The observed increase is highest for managers with greater levels of skill, where any tracking error limit is high and total costs are low. This is one of the first studies in the Australian market and is expected to have a high degree of relevance to institutional investors considering active extension strategies.
Keywords: 130/30, Active extension trading strategies, long/short equity, Australia
How to Cite:
Segara, R., Das, A. & Turner, J., (2012) “Performance of Active Extension Strategies: Evidence from the Australian Equities Market”, Australasian Accounting, Business and Finance Journal 6(3), 3-24. doi: https://doi.org/10.14453/aabfj.v6i3.2
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