(Chapter 8) You are the portfolio manager for a long-short U.S. equity trading strategy. Your...
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(Chapter 8) You are the portfolio manager for a long-short U.S. equity trading strategy. Your job is to hold a long portfolio with 100 stocks and a short portfolio with 100 stocks from among all stocks in the S&P 1500 index. You decide to create a trading rule based on the Heston and Sadka (2008) seasonality anomaly. What would your trading rule look like? Specifically, you should answer the following questions:
How frequently would you rebalance your portfolio and why?
How would you calculate the signal for each stock?
Would you buy stocks with a high "signal" value and short-sell stocks with a low "signal" value or vice versa?
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