Can someone explain to me why a hedged equity would not be considered a relative value strategy but convertible arbitrage and equity market neutral would be? To me hedged equity is long short except you’re not long/short securities in the same industry like market neutral…
include equity market neutral, convertible arbitrage, and hedged equity
Schweser 3-day workshop question book says hedged equity is NOT relative value strategy…is it wrong?
check your book …
“Relative value, in which the manager seeks to exploit valuation discrepancies through long and short positions. This label may be used as a supercategory for, for example, equity market neutral, convertible arbitrage, and hedged equity.”
Market neutral is relative value as you hedge out the systematic component and pick weaker / stronger ones (eg you are buying bank of America selling citi). Equity long short does not necessarily hedge out systematic risk (beta can be non-zero) so technically you’re not making proper relative value trades
That’s how i understood it too…thanks. I guess Schweser is wrong!