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A Spectral Model of Turnover Reduction

Author

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  • Zura Kakushadze

    (Quantigic® Solutions LLC, 1127 High Ridge Road #135, Stamford, CT 06905, USA
    Business School & School of Physics, Free University of Tbilisi, 240, David Agmashenebeli Alley, Tbilisi 0159, Georgia)

Abstract

We give a simple explicit formula for turnover reduction when a large number of alphas are traded on the same execution platform and trades are crossed internally. We model turnover reduction via alpha correlations. Then, for a large number of alphas, turnover reduction is related to the largest eigenvalue and the corresponding eigenvector of the alpha correlation matrix.

Suggested Citation

  • Zura Kakushadze, 2015. "A Spectral Model of Turnover Reduction," Econometrics, MDPI, vol. 3(3), pages 1-13, July.
    • Handle: RePEc:gam:jecnmx:v:3:y:2015:i:3:p:577-589:d:53387
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    References listed on IDEAS

    as
    1. Li, Huanan & Wei, Yi-Ming, 2015. "Is it possible for China to reduce its total CO2 emissions?," Energy, Elsevier, vol. 83(C), pages 438-446.
    2. Fung, William & Hsieh, David A., 1999. "A primer on hedge funds," Journal of Empirical Finance, Elsevier, vol. 6(3), pages 309-331, September.
    3. Fung, William & Hsieh, David A., 2000. "Performance Characteristics of Hedge Funds and Commodity Funds: Natural vs. Spurious Biases," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(3), pages 291-307, September.
    4. Zura Kakushadze, 2014. "Can Turnover Go to Zero?," Papers 1406.0044, arXiv.org, revised Oct 2014.
    5. Zura Kakushadze & Jim Kyung-Soo Liew, 2014. "Is It Possible to OD on Alpha?," Papers 1404.0746, arXiv.org, revised Nov 2018.
    6. Liang, Bing, 2000. "Hedge Funds: The Living and the Dead," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(3), pages 309-326, September.
    7. Agarwal, Vikas & Naik, Narayan Y., 2000. "Multi-Period Performance Persistence Analysis of Hedge Funds," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(3), pages 327-342, September.
    8. Zura Kakushadze, 2014. "Factor Models for Alpha Streams," Papers 1406.3396, arXiv.org, revised Oct 2014.
    9. Fung, William & Hsieh, David A, 2001. "The Risk in Hedge Fund Strategies: Theory and Evidence from Trend Followers," The Review of Financial Studies, Society for Financial Studies, vol. 14(2), pages 313-341.
    10. Zura Kakushadze, 2014. "Notes on Alpha Stream Optimization," Papers 1406.1249, arXiv.org, revised Mar 2015.
    11. Zura Kakushadze, 2014. "Combining Alpha Streams with Costs," Papers 1405.4716, arXiv.org, revised Jan 2015.
    12. Thomas Schneeweis & Richard Spurgin & David McCarthy, 1996. "Survivor bias in commodity trading advisor performance," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 16(7), pages 757-772, October.
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    Cited by:

    1. Zura Kakushadze, 2015. "Combining Alphas via Bounded Regression," Risks, MDPI, vol. 3(4), pages 1-17, November.

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