A tiny edge and uncertain costs

A signal's predicted average edge is close to the estimated transaction cost. What additional analysis is needed before allocating capital?

Assess uncertainty in both expected returns and costs, particularly spread, market impact and adverse selection at the intended size. Use conservative scenarios, capacity analysis and realistic fill modelling. Examine concentration and tail losses, then consider prospective execution evidence with controlled risk. A positive difference between two point estimates is not a reliable estimate of deployable profit.