Fundamental Short Selling Research

Eric Fernandez, CFA

TwoRiversAnalytics

Cross Asset Strategy

Multiple Countries / Cross Asset Strategy

<ul>
<li>The sharp downdraft predictably hurt smaller caps, lower priced and high beta shares more than their opposites. Small caps appear relatively undervalued.</li>
<li>Shorts are doing well. Not only did stocks drop, producing short beta, but highly shorted stocks fell much more, driving alpha.</li>
<li>Price momentum barely added value. Stocks that had rallied over the past year gained a bit more than others, but not enough to be meaningful. The trend was inconsistent.</li>
</ul>


The sharp downdraft predictably hurt smaller caps, lower priced and high beta shares more than their opposites. Small caps appear relatively undervalued.
Shorts are doing well. Not only did stocks drop, producing short beta, but highly shorted stocks fell much more, driving alpha.
Price momentum barely added value. Stocks that had rallied over the past year gained a bit more than others, but not enough to be meaningful. The trend was inconsistent.


What’s Working? High Stock Price, Leverage, High Value-Add Companies and Shorting