Alpha is the long-established measure of investment performance. But Andrew Lo has come up with a new twist on the metric.
He calls it dynamic alpha, and it tells you over what time horizon an individual investor or trading model does best.
Lo, who is an academic and investor, believes quant managers could use the measure to mould strategies to trade at the most effective frequency. Pension funds and insurers could use it to ensure diversification across investment styles. Stock pickers could