A Spectral Model of Turnover Reduction
classification
💱 q-fin.GN
keywords
reductionturnoveralphaalphaslargemodelnumbercorrelation
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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.
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