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Mike Smith is a consultant evaluating a market neutral long–short strategy for his client. Based on...

Mike Smith is a consultant evaluating a market neutral long–short strategy for his client. Based on the holdings data he receives from the client, Smith notices a small but persistent difference between the alphas generated on the long side and those generated on the short side.

State which of the two alphas is more likely the larger one, and provide three reasons why that might be the case.

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