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arXiv · 1509.08110

Performance v. Turnover: A Story by 4,000 Alphas

Zura Kakushadze·Igor Tulchinsky
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Abstract

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 dependence on the turnover T. We also find a scaling R ~ V^X, where V is the portfolio volatility, and the power X is around 0.8-0.85 for holding periods up to 10 days or so. To our knowledge, this is the only publicly available empirical study on such a large number of real-life trading portfolios/alphas.

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Zura Kakushadze, Igor Tulchinsky. 2015-09-27. Performance v. Turnover: A Story by 4,000 Alphas. https://arxiv.org/abs/1509.08110

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