Complementarity and substitutability of investment strategies

This study quantifies the impact of a reallocation of capital between investment strategies on the cross-section of their performance when capital flows are the sole transmission channel. The main finding of our counterfactual analysis is that capacity of strategies, correlation of returns and the cyclical nature of investment strategies’ risk premia can be explained by the self- and cross-impact caused by simple capital reallocation in an evolutionary finance model.