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A Spectral Model of Turnover Reduction

Zura Kakushadze ()
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Zura Kakushadze: Quantigic® Solutions LLC, 1127 High Ridge Road #135, Stamford, CT 06905, USA

Econometrics, 2015, vol. 3, issue 3, 1-13

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.

Keywords: hedge fund; alpha stream; crossing trades; transaction costs; portfolio turnover; correlation structure; large N limit (search for similar items in EconPapers)
JEL-codes: B23 C C00 C01 C1 C2 C3 C4 C5 C8 (search for similar items in EconPapers)
Date: 2015
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