An equity long/short hedge fund strategy involves:

Question: An equity long/short hedge fund strategy involves:

Answer options:

• Only buying stocks (long positions) with the expectation of rising prices.
• Only selling stocks short (short positions) with the expectation of falling prices. ✅ Taking both long positions in undervalued stocks and short positions in overvalued stocks.
• Primarily investing in fixed income securities with a long-term horizon.

Correct answer: Taking both long positions in undervalued stocks and short positions in overvalued stocks.

Explanation: An equity long/short strategy seeks to profit from both rising and falling stock prices. It involves buying stocks expected to appreciate (long) and selling stocks expected to depreciate (short), allowing the fund to potentially generate returns regardless of market direction.