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overlapping return in alphalens


When using alphalens to analyze the factor, it computes forward return on a daily basis. Then the returns computed today versus tomorrow have a massive proportion that are overlapped.
Did alphalens adjust for this in the return calculation?

2 responses

As far as I know it doesn't unfortunately, as pointed out by Michael Matthews in this thread. Unless there's been a fix submitted to this on GitHub?

I read some thread, I think the suggested change is to consider it as different tranche. For example, a weekly rebalance strategy require hold it for a month would have four tranche, and the return at any week would be the average of the trench. What if you have a bi-weekly rebalance strategy that require holding it for 3 weeks, if you consider this strategy has two tranches, you will always have a week that only hold one tranche and cash. Should the return be scale up even it is probably not implementable or consider you are indeed hold some cash in the portfolio.