Save the Trading Costs: Simple and Intuitive Rule for Smart Beta Strategy (Technical Appendix)

5 Pages Posted: 13 Nov 2014

Date Written: November 11, 2014

Abstract

We got a simple and intuitive rule for smart beta strategy by solving a quadratic problem with long only constraint and under existence of proportional trading costs. We can see two lines in optimal solution. Smart beta portfolio can save portfolio turnover (e.g. trading costs) by omitting trade against stocks between the two lines.

We proposed portfolio construction rule for smart beta strategy in previous paper ("Save the Trading Costs:Simple and Intuitive Rule for Smart Beta Strategy"). This paper is technical appendix for previous paper.

The paper "Save the Trading Costs: Simple and Intuitive Rule for Smart Beta Strategy" to which these Appendices apply is available at the following URL: http://ssrn.com/abstract=2453380

Keywords: Trading Costs, Smart Beta, Factor Tilts, Turnover

JEL Classification: G11, C61

Suggested Citation

Minami, Seiji and Wakatsuki, Tetsuroh, Save the Trading Costs: Simple and Intuitive Rule for Smart Beta Strategy (Technical Appendix) (November 11, 2014). Available at SSRN: https://ssrn.com/abstract=2522817 or http://dx.doi.org/10.2139/ssrn.2522817

Seiji Minami (Contact Author)

Resona Bank ( email )

Fukagawa Gatharia W2
5-65, Kiba 1-Chome
Tokyo, 135-8581
Japan

Tetsuroh Wakatsuki

Resona Bank ( email )

Tokyo
Japan

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