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Let's say I have a signal that is triggered by some "event".

The event can happen any number (N) of times per day, month or quarter.

I have a bankroll W.

Ideally, I have a perfect forecast of N and I invest, let's say I want equal notional weight, W/N in each idea.

But, if I don't know N, and have equal (low) conviction in each idea, how do you go about allocating to an opportunity like this?

I could see historically N / week( or month) and allocate accordingly. If there are more events, I could sell pro-rata and re-invest in the new event...etc.

Just wondering if there is something smarter to do here.

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  • $\begingroup$ Selling pro rata might be very expensive in transaction costs. I would try to estimate the number of event from history and the investment time length so that you have enough rolling treasury in theory to invest in each of the event without having the sell the previous ones. Optionally only put 90 to 95% of W in that strategy to still have a bit of treasury to play on weights or adjust to change in event frequency $\endgroup$
    – Mayeul sgc
    Jun 23 at 2:01

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