Dead Alphas as Risk Factors

Zura Kakushadze and Willie Yu

Papers from arXiv.org

Abstract: We give an explicit algorithm and source code for extracting equity risk factors from dead (a.k.a. "flatlined" or "hockey-stick") alphas and using them to improve performance characteristics of good (tradable) alphas. In a nutshell, we use dead alphas to extract directions in the space of stock returns along which there is no money to be made (and/or those bets are too volatile). In practice the number of dead alphas can be large compared with the number of underlying stocks and care is required in identifying the aforesaid directions.

Date: 2017-09
New Economics Papers: this item is included in nep-cmp
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Journal of Asset Management 19(2) (2018) 110-115, Invited Editorial

Downloads: (external link)
http://arxiv.org/pdf/1709.06641 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1709.06641

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().