We give an explicit algorithm and source code for combining alpha streams via bounded regression. In practical applications, typically, there is insufficient history to compute a sample covariance matrix (SCM) for a large number of alphas. To compute alpha allocation weights, one then resorts to...

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...

We give a complete algorithm and source code for constructing general multifactor risk models (for equities) via any combination of style factors, principal components (betas) and/or industry factors. For short horizons we employ the Russian-doll risk model construction to obtain a nonsingular...

We present explicit formulas - that are also computer code - for 101 real-life quantitative trading alphas. Their average holding period approximately ranges 0.6-6.4 days. The average pair-wise correlation of these alphas is low, 15.9%. The returns are strongly correlated with volatility, but...

We analyze empirical data for 4,000 real-life trading portfolios (U.S. equities) with holding periods of about 0.7-19 trading days. We find a simple scaling C ~ 1 / T, where C is cents-per-share, and T is the portfolio turnover. Thus, the portfolio return R has no statistically significant...

We give a complete algorithm and source code for constructing what we refer to as heterotic risk models (for equities), which combine: i) granularity of an industry classification; ii) diagonality of the principal component factor covariance matrix for any sub-cluster of stocks; and iii)...

We argue that an important contributing factor into market inefficiency is the lack of a robust mechanism for the stock price to rise if a company has good earnings, e.g., via buybacks/dividends. Instead, the stock price is prone to volatility due to rather random perception/interpretation of...