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

The Journal of Investment Strategies 5(2) (2016) 75-89, Invited Investment Strategy Forum Paper

17 Pages Posted: 10 Sep 2015 Last revised: 22 Mar 2016

See all articles by Zura Kakushadze

Zura Kakushadze

Quantigic Solutions LLC; Free University of Tbilisi

Igor Tulchinsky

WorldQuant LLC

Date Written: September 7, 2015

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.

Keywords: performance, turnover, return, alpha, hedge fund, portfolio, cents-per-share, volatility, P&L, equities, quantitative trading, empirical analysis

JEL Classification: G00

Suggested Citation

Kakushadze, Zura and Tulchinsky, Igor, Performance v. Turnover: A Story by 4,000 Alphas (September 7, 2015). The Journal of Investment Strategies 5(2) (2016) 75-89, Invited Investment Strategy Forum Paper, Available at SSRN: https://ssrn.com/abstract=2657603 or http://dx.doi.org/10.2139/ssrn.2657603

Zura Kakushadze (Contact Author)

Quantigic Solutions LLC ( email )

680 E Main St #543
Stamford, CT 06901
United States
6462210440 (Phone)
6467923264 (Fax)

HOME PAGE: http://www.linkedin.com/in/zurakakushadze

Free University of Tbilisi ( email )

Business School and School of Physics
240, David Agmashenebeli Alley
Tbilisi, 0159
Georgia

Igor Tulchinsky

WorldQuant LLC ( email )

1700 East Putnam Ave, Third Floor
Old Greenwich, CT 06870
United States

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