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Liquidity Premium with Adam Butler (S1E8)
Flirting with Models
Is There a Little Baby Over There?
If you ERC weight, just acknowledging that those different signals have different levels of correlation with one another. But if you actually find through optimization the maximally diversified exposure to those signals, you get up to sort of 2 independent bets. And so just going back to Grinnold's fundamental law of active management, then what it says is your expected risk adjusted performance is a function of skill in the square root of breadth.
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