People are saying I am not posting enough finance content. FINE. Once you have decent alphas a lot of the skill in running a systematic strategy is reducing turnover. Alpha is unknown but trading costs are certain. Keep trading to the minimum needed to monetise your alpha.
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Replying to @macrocephalopod
Also interesting to take into account your alpha autocorrelation through time: might be optimal to take the position now despite transaction costs if your alpha is relatively slow to decay. With linear costs + AR(1) alpha + quadratic risk = no trade region
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Replying to @Bourbakinho @macrocephalopod
Closed form solutions exist for the multiple assets with quadratic costs and quadratic risk penalty. With linear costs and multiple assets, the problem is much less analytically tractable...Same with max positions constraints.
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Replying to @Bourbakinho
Yeah any kind of inequality constraint really screws you.
10:38 AM - 20 Mar 2021
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