TY - JOUR T1 - 130/30 JF - Special Issues SP - 186 LP - 211 VL - 2008 IS - 1 AU - Andrew W. Lo AU - Pankaj N. Patel Y1 - 2008/06/20 UR - https://pm-research.com/content/2008/1/186.abstract N2 - Long-only portfolio managers and investors have acknowledged that the long-only constraint is a potentially costly drag on performance and loosening this constraint can add value, but the extent of the performance drag is difficult to measure without a proper benchmark for a 130/30 portfolio. A passive but dynamic benchmark can be developed, consisting of a plain-vanilla 130/30 strategy using simple factors to rank stocks and standard methods for construction of portfolios based on these rankings. Two types of indexes are produced—investable and look-ahead indexes; the former uses only prior information, and the latter uses realized returns to set an upper bound on performance. Historical simulations of these 130/30 benchmarks illustrate their advantages and disadvantages under various market conditions. ER -