Estimate the alpha decay rate due to factor crowding. As more capital chases a factor, prices rise and expected returns fall. Model crowding via holdings-based overlap metric and predict future alpha.
Enter the values for the scenario you are assessing. Estimate the alpha decay rate due to factor crowding. As more capital chases a factor, prices rise and expected returns fall. Model crowding via holdings-based overlap metric and predict future alpha. Use the alpha decay crowding result to inform your calculation.