In the long-short strategy that is market-neutral, if the beta of the long and short positions are the same then the sizes are the same. Then, if the beta of the long position is higher than the short positions, would the size of the long be smaller than the short position? Is this conclusion correct?
Thank you.
Yes, if the betas are equal and the resulting (dollar) beta is zero, then the sizes need to be the same. However, the point is that the betas aren’t equal.
Typically it’s the other way round: the (weighted average) beta of the short positions is greater than the (weighted avearge) beta of the long positions.
But you’re correct: the postion with the higher beta has the smaller amount.
You’re quite welcome.