Report
Alpha calibration: Are you doing it right?
Having the right portfolio construction tool is a good starting point.
For both quantitative and fundamental managers, alpha calibration is a critical part of the optimal portfolio construction process – but are you leveraging your portfolio construction tool to its full potential?
The role of modern portfolio construction tools
Most optimization processes include an objective function with one or more terms and advanced portfolio construction tools, such as the Axioma Portfolio Optimizer, excel in targeting specific risk levels. But, when multiple terms are included, managers often mix and match the scaling of the terms which is asking the optimizer to compare apples to oranges and leads to less relevant or suboptimal allocations.
In this paper, you will learn about:
- the different types of alphas generally used by portfolio managers
- the potential consequences of not calibrating alphas
- the calibration process and its intuition
Download Report
