Related papers: A Spectral Model of Turnover Reduction
Internal crossing of trades between multiple alpha streams results in portfolio turnover reduction. Turnover reduction can be modeled using the correlation structure of the alpha streams. As more and more alphas are added, generally…
In these notes we discuss investment allocation to multiple alpha streams traded on the same execution platform, including when trades are crossed internally resulting in turnover reduction. We discuss approaches to alpha weight…
We discuss investment allocation to multiple alpha streams traded on the same execution platform with internal crossing of trades and point out differences with allocating investment when alpha streams are traded on separate execution…
An investment portfolio consists of $n$ algorithmic trading strategies, which generate vectors of positions in trading assets. Sign opposite trades (buy/sell) cross each other as strategies are combined in a portfolio. Then portfolio…
We give an explicit algorithm and source code for combining alpha streams via bounded regression. In practical applications typically there is insufficient history to compute a sample covariance matrix (SCM) for a large number of alphas. To…
We theoretically and empirically study portfolio optimization under transaction costs and establish a link between turnover penalization and covariance shrinkage with the penalization governed by transaction costs. We show how the ex ante…
It is well known that combining multiple hedge fund alpha streams yields diversification benefits to the resultant portfolio. Additionally, crossing trades between different alpha streams reduces transaction costs. As the number of alpha…
We consider the multi-period portfolio optimization problem with a single asset that can be held long or short. Due to the presence of transaction costs, maximizing the immediate reward at each period may prove detrimental, as frequent…
Correlation matrices inferred from stock return time series contain information on the behaviour of the market, especially on clusters of highly correlating stocks. Here we study a subset of New York Stock Exchange (NYSE) traded stocks and…
The steady-state turnover of a trading strategy is of clear interest to practitioners and portfolio managers, as is the steady-state Sharpe ratio. In this article, we show that in a convenient Gaussian process model, the steady-state…
We consider a simplified model for optimizing a single-asset portfolio in the presence of transaction costs given a signal with a certain autocorrelation and cross-correlation structure. In our setup, the portfolio manager is given two…
Nowadays, human resource is an important part of various resources of enterprises. For enterprises, high-loyalty and high-quality talented persons are often the core competitiveness of enterprises. Therefore, it is of great practical…
We introduce a trade strategy representation theorem for performance measurement and portable alpha in high frequency trading, by embedding a robust trading algorithm that describe portfolio manager market timing behavior, in a canonical…
Despite the availability of very detailed data on financial market, agent-based modeling is hindered by the lack of information about real trader behavior. This makes it impossible to validate agent-based models, which are thus…
We study optimal investment with multiple assets in the presence of small proportional transaction costs. Rather than computing an asymptotically optimal no-trade region, we optimize over suitable trading frequencies. We derive explicit…
Motivated by recent advances in the spectral theory of auto-covariance matrices, we are led to revisit a reformulation of Markowitz' mean-variance portfolio optimization approach in the time domain. In its simplest incarnation it applies to…
Transformer models contain substantial internal redundancy arising from coordinate-dependent representations and continuous symmetries, in model space and in head space, respectively. While recent approaches address this by explicitly…
The purpose of these notes is to provide a systematic quantitative framework - in what is intended to be a "pedagogical" fashion - for discussing mean-reversion and optimization. We start with pair trading and add complexity by following…
In a fixed time horizon, appropriately executing a large amount of a particular asset -- meaning a considerable portion of the volume traded within this frame -- is challenging. Especially for illiquid or even highly liquid but also highly…
The cross correlation matrix between equities comprises multiple interactions between traders with varying strategies and time horizons. In this paper, we use the Maximum Overlap Discrete Wavelet Transform to calculate correlation matrices…