6.3. OUTPUT OF PORTFOLIO CONSTRUCTION MODELS
Regardless of the type of portfolio construction approach used, the output of the quantitative portfolio construction model is a targeted portfolio: the desirable individual positions and the targeted sizes of each. This target portfolio is compared to the current portfolio, and the differences are the trades that need to be done. In the case that a brand-new portfolio is being built from scratch, all the positions recommended by the portfolio construction model will need to be executed. If, instead, the quant is rerunning the portfolio construction model as she would do periodically in the normal course of business, she would need to do only the incremental trades that close the gap between the newly recommended portfolio and the existing portfolio she holds. It is, as you have guessed by now, also interesting to consider how often the quant reoptimizes her portfolio.
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