TY - JOUR T1 - Signal Weighting JF - The Journal of Portfolio Management SP - 24 LP - 34 DO - 10.3905/jpm.2010.36.4.024 VL - 36 IS - 4 AU - Richard Grinold Y1 - 2010/07/31 UR - https://pm-research.com/content/36/4/24.abstract N2 - Signal weighting is the name commonly used for the allocation of risk between several potential sources, or themes, each of which is assumed to have some potential for adding value. The signal-weighting decision is an important facet of any investment process. Grinold presents a portfolio-based approach to the choice of signal weights in the presence of trading costs. In the absence of costs, the weights depend on the assessed strength of the signals—the correlations between the signal and the desired level of portfolio risk. In the presence of costs, the method also depends critically on the rate that new information arrives for each of the signals as well as the rate of change (trading speed) of the portfolio. The resulting model is robust and relatively simple to use. The model also forces portfolio managers to view their portfolios and their respective drivers as objects in motion. That change of perspective alone is valuable. Technical material is contained in two appendices that can be obtained from the author.TOPICS: Analysis of individual factors/risk premia, VAR and use of alternative risk measures of trading risk, portfolio management/multi-asset allocation ER -