No.PZ2021052007000002 (问答题)来源:
Ling Chang, a Hong Kong-based EMN manager, has been monitoring PepsiCo Inc. (PEP) and Coca-Cola Co. (KO), two global beverage industry giants. After examining the Asia marketing strategy for a new PEP drink, Chang feels the marketing campaign is too controversial and the overall market is too narrow. Although PEP has relatively weak earnings prospects compared to KO, 3-month valuation metrics show PEP shares are substantially overvalued versus KO shares (relative valuations have moved beyond their historical ranges). As part of a larger portfolio, Chang wants to allocate $1 million to the PEP versus KO trade and notes the historical betas and S&P 500 Index weights, as shown in the following table.
Discuss how Chang might implement an EMN pairs trading strategy.
Chang should take a short position in PEP and a long position in KO with equal beta-weighted exposures. Given Chang wants to allocate $1 million to the trade, she would take on a long KO position of $1 million. Assuming realized betas will be similar to historical betas, to achieve an equal beta-weighted exposure for the short PEP position, Chang needs to short $846,154 worth of PEP shares [= –$1,000,000 / (0.65/0.55)]. Only the overall difference in performance between PEP and KO shares would affect the performance of the strategy because it will be insulated from the effect of market fluctuations. If over the next 3 months the valuations of PEP and KO revert to within normal ranges, then this pairs trading EMN strategy should reap profits.
老师，可以解释一下为什么这么算？除了short PEP, 还要long KO吗？谢谢！
