How much risk does an investment portfolio turn over in a given period of time? In other words, how aggressively does it trade in terms of changing exposure to underlying risks? Rather surprisingly, the investment community still lacks a consistent definition that measures this important...

We demonstrate that eigenvalues minimize information entropy of the main diagonal elements of a symmetric matrix over all possible orthogonal transforms. This legitimizes the use of the exponential entropy of standardized eigenvalues as a measure of effective covariance matrix dimensionality. In...

Allocation between factor portfolios can bring significant advantages over traditional portfolio optimization performed among individual assets or asset classes. One such advantage is a substantial dimension reduction when one's attention turns from many assets to few factors. This, however,...

According to recent research, diversification across risk factors (or investment styles) proves to be more efficient than traditional asset class diversification. In this paper, we take the next step and show that it is economically worthwhile to combine risk factors in a dynamic manner, in a...

We introduce the notion of a patience premium, which is based on the concept of ambiguity aversion and is an ambiguity premium. We identify three reasons for the existence of the patience premium: Certainty preferences: perceived confidence in the expected performance; Comparison with peers:...

The systematic style is a combination of a systematic strategy's (model's) decisions and those of the portfolio manager's. Whilst the model's trades are implemented via changing positions in financial instruments, the systematic manager's trades are changes made to the systematic strategy...