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Econometrics 2015, 3(3), 577-589; doi:10.3390/econometrics3030577

A Spectral Model of Turnover Reduction

1
Quantigic® Solutions LLC, 1127 High Ridge Road #135, Stamford, CT 06905, USA
2
Business School & School of Physics, Free University of Tbilisi, 240, David Agmashenebeli Alley, Tbilisi 0159, Georgia 
Academic Editor: Kerry Patterson
Received: 27 March 2015 / Revised: 26 June 2015 / Accepted: 24 July 2015 / Published: 29 July 2015
View Full-Text   |   Download PDF [250 KB, uploaded 29 July 2015]   |  

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. View Full-Text
Keywords: hedge fund; alpha stream; crossing trades; transaction costs; portfolio turnover; correlation structure; large N limit hedge fund; alpha stream; crossing trades; transaction costs; portfolio turnover; correlation structure; large N limit
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. (CC BY 4.0).

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Kakushadze, Z. A Spectral Model of Turnover Reduction. Econometrics 2015, 3, 577-589.

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