Q6: Delaney Mackenzie – Your Quantitative Trading Questions Answered
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The Importance of Constraints in Portfolio Optimization
It's a little tricky for us to answer that because we don't look at people's strategies. The industry is moving towards constructing portfolios based on factors and analyzing portfolios based on their factor exposures. In regard to portfolio optimization is it possible to have too many constraints? I think the failure mode of having too many constraints is generally just going to be that the optimizer Isn't going to converge.
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