Turnover of investment portfolio via covariance matrix of returns
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arXiv
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| Format: | Preprint |
| Published: |
2024
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| _version_ | 1866917856636043264 |
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| author | Kuliga, A. V. Shnurnikov, I. N. |
| author_facet | Kuliga, A. V. Shnurnikov, I. N. |
| contents | An investment portfolio consists of $n$ algorithmic trading strategies, which generate vectors of positions in trading assets. Sign opposite trades (buy/sell) cross each other as strategies are combined in a portfolio. Then portfolio turnover becomes a non linear function of strategies turnover. It rises a problem of effective (quick and precise) portfolio turnover estimation. Kakushadze and Liew (2014) shows how to estimate turnover via covariance matrix of returns. We build a mathematical model for such estimations; prove a theorem which gives a necessary condition for model applicability; suggest new turnover estimations; check numerically the preciseness of turnover estimations for algorithmic strategies on USA equity market. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2412_03305 |
| institution | arXiv |
| publishDate | 2024 |
| record_format | arxiv |
| spellingShingle | Turnover of investment portfolio via covariance matrix of returns Kuliga, A. V. Shnurnikov, I. N. Portfolio Management Probability 60B99 An investment portfolio consists of $n$ algorithmic trading strategies, which generate vectors of positions in trading assets. Sign opposite trades (buy/sell) cross each other as strategies are combined in a portfolio. Then portfolio turnover becomes a non linear function of strategies turnover. It rises a problem of effective (quick and precise) portfolio turnover estimation. Kakushadze and Liew (2014) shows how to estimate turnover via covariance matrix of returns. We build a mathematical model for such estimations; prove a theorem which gives a necessary condition for model applicability; suggest new turnover estimations; check numerically the preciseness of turnover estimations for algorithmic strategies on USA equity market. |
| title | Turnover of investment portfolio via covariance matrix of returns |
| topic | Portfolio Management Probability 60B99 |
| url | https://arxiv.org/abs/2412.03305 |