TY - JOUR T1 - Optimal Turnover Constraints: <em>Scarcity Is Everywhere</em> JF - The Journal of Portfolio Management SP - 69 LP - 75 DO - 10.3905/JPM.2009.35.4.069 VL - 35 IS - 4 AU - Hao Yin Y1 - 2009/07/31 UR - https://pm-research.com/content/35/4/69.abstract N2 - An important question often faced by global portfolio managers is how to efficiently allocate a turnover budget across multiple markets that demonstrate different market characteristics and alpha model efficacies. Extending a dynamic model to a multi-market context, the author is able to provide several key insights for guiding practice. The author finds that in equilibrium more of the turnover budget should be allocated to markets in which 1) the alpha model produces higher information ratios, 2) new information arrives more rapidly, or 3) it is less expensive to trade. Optimal turnover, however, is rather insensitive to the aversion to risk in a given market. The author’s findings are derived within a cross-sectional framework, but this does not preclude their application in a multi-period turnover allocation problem.TOPICS: Manager selection, factor-based models, statistical methods ER -