Short Selling: Strategies, Risks, and Rewards

Short Selling: Strategies, Risks, and Rewards is a comprehensive, institutional-grade examination of short selling as a disciplined investment and risk-management practice. Authored by Cliff Asness—one of the most respected quantitative investors—and Frank J. Fabozzi, this book moves beyond myths and sensationalism to present short selling as a systematic, research-driven component of modern portfolio management.

The book explains the economic rationale for short selling, its role in price discovery, and its importance in maintaining market efficiency. Rather than focusing on speculative tactics, the authors present short selling within a broader framework that includes valuation, behavioral biases, factor exposure, and portfolio construction. Readers gain clarity on why overvaluation persists, how bubbles form, and how disciplined short strategies can exploit mispricing while managing asymmetric risk.

A major strength of this work is its rigorous treatment of risk. The authors address borrow constraints, short squeezes, recall risk, regulatory considerations, and behavioral traps that make short selling uniquely challenging. Practical guidance is provided on portfolio integration, hedging, and using short exposure to control downside risk rather than simply to speculate on price declines.

This is not a beginner’s guide. It is a professional reference for investors who want a realistic, evidence-based understanding of short selling as part of a diversified, long–short or market-neutral investment approach.

✅ What You’ll Learn:

• The economic role of short selling in efficient markets.
• Why overvaluation persists and how mispricing can be identified.
• Structural and behavioral risks unique to short positions.
• Portfolio construction techniques using long–short exposure.
• Risk controls for borrow availability, squeezes, and drawdowns.
• How short selling contributes to hedging and risk management.
• The difference between speculative shorting and systematic strategies.

💡 Key Benefits:

• Institutional perspective from leading quantitative investors.
• Reframes short selling as risk control, not pure speculation.
• Deepens understanding of market inefficiencies and valuation extremes.
• Enhances portfolio resilience through disciplined downside strategies.
• Serves as a definitive reference on professional short selling.

👤 Who This Book Is For:

• Advanced investors and portfolio managers.
• Quantitative and factor-based investment professionals.
• Hedge fund and long–short equity practitioners.
• Experienced traders seeking a realistic understanding of short-side risk.

📚 Table of Contents:

• The Mechanics of Short Selling
• Theory and Evidence on Short Selling
• Short Selling Strategies
• Short Selling and Market Efficiency

Short Selling: Strategies, Risks, and Rewards By Frank J. Fabozzi