Short selling leverage securities prices in theory

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Short Selling & Leverage: securities prices, in theory, could rise without limitation. Business Risk: unlike mutual funds, hedge funds companies are usually start-ups.
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-Generally 3 major categories on the strategies: -Relative Value Strategies:
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Equity Market-Neutral: designed to exploit equity market inefficiencies and opportunities by creating simultaneously long and short matched equity portfolios of around the same size. o Goal is to generate returns that do not depend on the direction of the stock market. o Reason: long positions will rise more in price than short positions in rising markets, short positions will fall more in price than long positions in declining markets. Positive outcome regardless. Convertible Arbitrage: identify and exploit mispricing between convertible securities and the underlying stock. Fixed-Income Arbitrage: attempts to profit from price irregularities between related interest rate securities and derivatives. -Event-Driven Strategies: Merger or Risk Arbitrage: invests simultaneously in long and short positions in the common stock of companies involved in a proposed merger or acquisition. Involves taking a long position in the company being acquired and short position in the acquiring company. Distressed Securities: invests in the equity or debt securities of companies that are in financial difficulty and face bankruptcy or reorganization. High-Yield Bonds: invests in high-yield debt securities (junk bonds) of a company the manager feels may get a credit upgrade or is a potential takeover target. -Directional Funds:
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Long/Short Equity: most popular. The manager either has a net long or net short exposure to the stock market. Manager is not trying to eliminate market effects or market trends like equity market-neutral strategy.
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