Thank you for the thread. What's the shortest time-frame you've seen a fundamental PM have a good alpha curve on? Have always wondered if there are institutional non-quant folks who only trade AAPL/TSLA in and out or a guy who only holds through earnings etc
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The sell side “alpha capture” models that hedge funds like wace ran in the early 2000s had alpha over 1-5 days, this gradually sped up over time until almost all the alpha was realised over 1-24 hours. Churn was high!
Bit of a special case since part of the alpha here was getting ahead of slower moving traders who followed the analyst recs but took longer to do it, ie the recs moved the market. But it’s not that unusual for analysts to have pretty quick alpha!
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May I pls ask what do you mean by “churn” here? Also, how do you quantify alpha on day 1 or the early period? Thank you
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Churn = turnover (e.g. what % of the portfolio is traded each day). To quantify alpha you plot an "alpha curve" (also called a markout or event study) as
@pmje73 suggests, i.e. a graph of your average return on trades as a function of holding period. - Show replies
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