market-neutral investing(redirected from Market Neutral Trading Strategy)
An investment strategy in which one seeks to make the same return regardless of the performance of the broader market. There is no single way of executing a market neutral strategy, but it usually involves taking a combination of long positions and short positions. For example, one may take a long position on one index while also taking a short position on a similar but not identical index. Market neutral investing may also involve some form of arbitrage.
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An investment strategy of attempting to assemble an investment portfolio with a return that is unaffected by returns in the overall market. For example, an investor might buy shares of a petroleum company the investor considers undervalued and sell short an equal value of shares of a different petroleum company the investor considers overvalued. The investor expects to profit regardless of whether the overall market rises or declines. Market-neutral investing utilizes hedging in an attempt to profit from market inefficiencies.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.