RT Journal Article SR Electronic T1 Long-Short Portfolio Management JF The Journal of Portfolio Management FD Institutional Investor Journals SP 23 OP 32 DO 10.3905/jpm.1999.319730 VO 25 IS 2 A1 Bruce I. Jacobs A1 Kenneth N. Levy A1 David Starer YR 1999 UL https://pm-research.com/content/25/2/23.abstract AB With the freedom to sell short, an investor can benefit from stocks with negative expected returns as well as from those with positive expected returns. The authors explain that the benefits of combining short positions with long positions in a portfolio context, however, depend critically on the way the portfolio is constructed. Only an integrated optimization that considers the expected returns, risks, and correlations of all securities simultaneously can maximize the investor's ability to trade off risk and return for the best possible performance. This holds true whether or not the long–short portfolio is managed relative to an underlying asset class benchmark. Despite the incremental costs associated with shorting, the authors argue that a long–short portfolio, with its enhanced flexibility, can be expected to perform better than a long–only portfolio based on the same set of insights.