What is a precise mathematical definition of portfolio turnover? Here’s a question to tease out the various issues.
Suppose I have a market-neutral fund starting with $1MM. The portfolio goes long a bastket of stocks equal to $1MM and goes short a basket equal to $1MM in value. In 6 months, the long portfolio is replaced with a whole new set of long stocks, and the short portfolio is replaced with a new set of shorts. The longs never overlapped with the shorts. In 1 year, the long and short portfolios are liquidated leaving $1.5 MM in cash.作者: mfleming1983 时间: 2013-4-28 08:12
You need to calculate how many times your long position (and the short as well) will be replaced. In order to turn over your long position you need to sell it and then to buy a new bunch of stocks. The similar operation concerns the short position, but in the reverse order. Each turn of buy/sell/buy incurs transaction costs. So you can easily get how many times your portfolio has been turned over. If you turn over just a portion of either position, then, calculate that portion which to be less than 1.作者: Zestt 时间: 2013-4-28 08:12
