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Hi @David Harper CFA FRM CIPM

This is probably a trivial question.

In the notes to Grinold (and in the reading itself) about Alpha scaling it states:

using Alpha = Vol * IC * Score how do we get to IC being reduced by 62% in the above? Score we assume is 0 so I tried to scale the average alpha of the original and modified and i got 72% reduction but I have a feeling I'm reading this incorrectly!.

Thanks

This is probably a trivial question.

In the notes to Grinold (and in the reading itself) about Alpha scaling it states:

*...the original alphas have a standard deviation of 2.00 percent and the modified alphas have a standard deviation of 0.57 percent. This implies that the constraints in this example effectively shrank the IC by 62 percent, a significant reduction.*using Alpha = Vol * IC * Score how do we get to IC being reduced by 62% in the above? Score we assume is 0 so I tried to scale the average alpha of the original and modified and i got 72% reduction but I have a feeling I'm reading this incorrectly!.

Thanks

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