Posted by RTNL at Jan 17, 2022 5:11:49 PM
Re: Risk
Hi Jim,

The earlier performance greatly outperforms the benchmark while the latter performance looks similar to the iwc etf vs spy etf. This can happen with bad luck (factors lose favor, picking an unfavorable universe, or a low turnover portfolio with an unfavorable entry point) and/or over fitting. Ways to decrease but not eliminate this risk are multi factor portfolios, bigger or different universe, multiple entry points or increased turnover, and a sensitivity analysis (change all the portfolio parameters including the universe and time frame to look for a slow degradation in performance). I'm sure you thought of most if not all of these ideas but I'm putting them here in case you didn't.


Nice discussion guys. Things that always keeps me from high turnover portfolios are trading costs and tax hit. How do you guys plan for that?