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A Spectral Model of Turnover Reduction (1404.5050v4)
Published 20 Apr 2014 in q-fin.GN
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.
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