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Alpha model definition

A full-blown alpha model covering all securities is typically employed by quantitative or high frequency firms due to its reliance on computing power.

Intermediate

Alpha model is a model for forecasting the future return of securities in the coverage universe. Inputs to an alpha model may include fundamental, quantitative or technical factors. An alpha model, when paired with a risk model is used to derive portfolio weights using portfolio optimization software.


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Quiz

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The frequency of updates to an alpha model are tied closely with the portfolio rebalance frequency. | True or False?

True

In a Sentence

Wes:  Exactly why would you want to push our alpha model  up to the cloud?
Guy:  I don't know, it just sounded like a cool project.

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Keywords:
alpha model
forecast return
stocks
coverage universe
fundamental
quantitative
technical
risk model
portfolio weight
portfolio optimization
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