Large Signal Libraries: Equal-Weight Limits and the Divergent Spectra of Signals and PnL

RESUMO

An ensemble of roughly 3,000 signals over 20 assets was reported to have approximately 90% correlation with the leading component of the asset-space return structure. This paper develops population theory distinguishing the equal-weight signal, signal principal components, equal-weight PnL, and PnL principal components, showing crowding alone imposes neither a nonzero mean nor agreement with a principal component.