# Tagged Questions

The tag has no usage guidance.

7k views

### Discrete returns versus log returns of assets

There have been similar posts here already but nevertheless I find the question worth posting: why do some people claim that log returns of assets are more suitable for statistics than discrete ...
404 views

### Toy models of asset returns

When making simple agent-based models of banking systems to look at global properties (say systemic risk) one of the basic decisions you have to make is how to model returns on external (to the ...
472 views

### Why are factor models so popular for risk analysis of portfolios?

As titled, my question consists on asking for why in the most of academic papers one almost always finds that when you try to model asset returns, one needs to adjust for risk factors before analyzing ...
2k views

### Computing the Sharpe Ratio

The building blocks of the Sharpe ratio—expected returns and volatilities—are unknown quantities that must be estimated statistically and are subject to estimation error. The main problem I have is ...
17k views

### How to calculate equally weighted market portfolio

There's two studies that test the same thing in different markets (i.e. they apply the identical methodology). They state: 1) "$R_{mt}$ is the equally weighted average stock return in the dual-listed ...
127 views

### How to compute daily compounded backtest returns closer to real-world results?

I often run quick tests of trading strategies in my analytics suites by: multiplying a vector of signal (lagged, {-1,0,1}) with a time series of daily percentage returns doing a cumulative product ...
23 views

### Polynomial interpolation of corrected lognormal distribution

Can anyone provide a formula for a polynomial interpolation of the corrected lognormal distribution used to model returns traditionally resulting from the wrong Brownian motion generated model? ...
4k views

### What is the price pressure?

What is the definition of price pressure and what does it imply? In a number of paper I read that the price pressure can influence the portfolio returns; can you explain why and in which way it can ...
221 views

### Intuition behind Fama-French factors

In the Fama-French 3-factor model the portfolio returns are explained by the market the SMB factor (Small [market capitalization] Minus Big) and the HML factor (High [book-to-market ratio] Minus ...
38 views

### Is a position-weighted sum of nominal returns for a single asset a mathematically sound calculation?

A friend of mine insists that that the following is a sound method to calculate the performance of a single holding in a portfolio, given that over time more capital has been allocated to that holding....
178 views

### Back to Basics — Cumulative Returns

I recently came across a chart of Fama-French's (FF) HML factor cumulative performance. I first saw this in an article by AQR's Cliff Asness: http://www.institutionalinvestor.com/Article/3315202/Asset-...
742 views

### What data transformations to use in regression of credit spreads on equity prices?

Clearly there is a strong relationship between credit spreads and equity prices (both theoretically and empirically). But how would one go about formulating a regression which seeks to explain this ...
352 views

12 views

### presence of drift in an asset over short periods of time [closed]

My question is very simple. Given that assets can frequently have an expected drift over time in their value, does this drift hold up or is it even significant over periods of time anywhere between a ...
I am looking at the Vasicek Asymptotic Single Risk Factor Model and cannot figure out the covariance, which should be $\sqrt{\rho_i\rho_j}$ The standardized asset returns \$B^i=\sqrt{\rho_i}M+\sqrt{1-\...