# Tagged Questions

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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 ...
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### 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 ...
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### 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 ...
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### 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 ...
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### 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 ...
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### 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 ...
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### 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? ...
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### 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 ...
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### 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 ...
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### 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....
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### 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-...
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### 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 ...
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I intend to calculate the daily return on my investment in forex. Assume a trader invests $\$$40 at a leverage of 100:1, so in total he is trading \$$4000 worth of currency, and assume the position ... 0answers 115 views ### Empirical distribution function of overlapping time series data If we model asset return volatility for periods of more than one (say more than one day) there is the square-root rule which holds true under some assumptions. The situation is more tricky if we look ... 1answer 50 views ### How to simulate asset returns using student t? I am currently trying to simulate an asset return using the student-t distribution, but I can't find how I should do this. I began with the Geometric Brownian motion and just changed in order that ... 1answer 142 views ### Calculating returns for a mutual fund with dividends I'd like to calculate returns for a given mutual fund (in this case, PRWCX from troweprice). When I look at their published performance, it says the Calendar Year Total Returns for 2013 is 22.43% but ... 0answers 60 views ### Computing Overall Return for A Single Asset Given Inflows & Outflows I am creating a portfolio tracking model in Excel and have run into difficulty on how to track the overall performance of a single asset, given that over time more and less capital (shares) has been ... 0answers 34 views ### Disaggregating stock performance and dividend yield I modeled the performance of several portfolios with adjusted close data and would now like to understand how much of it is driven by changes in stock price and dividend payouts. I have all the data ... 2answers 406 views ### Trading days or Calendar days for Compound Annual Growth Rate? When calculating CAGR for intervals shorter than a year (or intervals that are longer than, but not integer years in length), should you use the 252 trading days or the 365.25 calendar days? The ... 3answers 2k views ### How to calculate return rates with negative prices? I'm dealing with electricity options and I'm considering the possibilty of negative prices. I want two estimate the historic volatility. However, an arithmetic mean doesn't feel appropriate and$\log(\...
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-\...