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Using total return calculations is critical in developing security selection models. The standard way to measure total return is to develop a series of price-adjusted data. Investopedia describes the ...
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Is Arithmetic Return Bias Basis of Low Vol Anomaly?

An observation in capital markets is that the connection between return and risk (measured as volatility) is not that straightforward (at least not as modern portfolio theory assumes). One interesting ...
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local price return and volume relationship

I wanted to see how the stock price and volume relationship is locally. So I tried ranking both the daily return (at day t) and volume (at day t) base on a 30 day rolling window with historical daily ...
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Square root of time

I am writing about VaR and I am wondering about the following: We can scale the VaR to different time horizons by using the square root of time, which means, that the volatility is adjusted by square ...
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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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Valuing Total Return Swaps

In my quest for simulated data, I am trying to generate prices for Total Return Swaps by calculating the NPVs of the fixed and floating leg. My problem: Given the fixed leg, how do I set the spread on ...
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I am interested in the formula LendingClub provides as their measure of "Net Annualized Return": $\big(1 + \frac{\sum_{i=1}^N{((I_i + L_i - S_i - C_i + R_i) / P_i) P_i}}{\sum_{i=1}^N{P_i}}\big)^{12}-... 2answers 151 views ITM Puts under negatively skewed return distribution (volatility skew) I read Hull (2009) on implied volatilies. I understand that (given a negatively skewed return distribution) an OTM-Put is more worth than under a normal distribution and that a OTM-Call is worth less ... 2answers 2k views Calculating Geometric mean I need to annualize daily returns for about 120 firms for over a period of 10 years. I chose to calculate the geometric return because 1) it is the actual return 2) to avoid the asymmetric effect of ... 3answers 619 views Logarithmic returns for realized variance? I am wondering which method makes more sense when computing log returns. I am trying to compute log returns for realized variance, and I have the opening and closing prices for every minute. Since ... 0answers 97 views What does it mean to adjust for short-run liquidity in finding risk-free rate of return Risk-free rate of return should equal the expected long-run growth rate of the economy with an adjustment for short-run liquidity. What is meant by the last phrase, "adjustment for short-run ... 2answers 70 views Correlation: Use Price or Return? Return doesn't make sense [closed] I am trying to find the correlation between the returns of two indices over a long period of time (10 years+) . Should I be using the index daily price level or the index daily total return? Most ... 1answer 65 views How can I compare two mutual funds' performance with a sparse set of data? I want to compare the performance of two mutual funds. The only data I have is annual returns for the past 7 years. So I have 7 observations for Fund 1 and 7 observations for Fund 2. In addition, I ... 1answer 263 views Regression giving the return on a stock I have this regression equation: $$R_{stock} = 3,28\% + 1,65*R_{market}$$ Where$R_{stock}$is the expected return on a stock and$R_{market}$being the market risk premium. I have a one-year T-... 2answers 143 views convert three months interbank rate into monthly rate I have a time series of the three month interbank rate each month and I suppose that the rate is has yearly frequency. I need these interbank rates to be on a monthly basis because I want to us these ... 0answers 29 views How to calculate monthly Return from a Momentum Strategy with overlapping Holdingperiods? I replicate a Momentum Strategy from Rey and Schmid (2007) "Feasible momentum strategies" based on the idea from Jegadeesh and Titman (1993). I only buy the single stock with the highest past return ... 0answers 30 views What is the expected rate of return from paying 1 today for a 50/50 bet receiving either 2 in year 1 or 0.5 in year 2? [closed] What do you think is the correct way to calculate expected return for this example? I think Method4 below is correct. Method1 35.4% = AVERAGE(1.0, 0.5^(1/2)-1) Incorrect, but some will argue that ... 0answers 38 views Generalized method of moments concept in CAPM testing In the course of my master thesis I’ve come across a paper by Carr and Wu (2009) where the authors evaluate whether returns on variance swaps can be explained by the simple CAPM. (really only market ... 1answer 33 views Intrepreting the Capital Market Line plot I am looking at plots of the Security Market (SML) line and Capital market line (CML). The X axis is the beta for the SML and Standard deviation for CML; the y axis is labeled with excess return. ... 1answer 295 views Required Rate of Return vs Expected Return I faced a problem that gives the following information: market risk premium, and risk free rate is given You currently have a portfolio of amount of x, beta b1. Now there is a new investment ... 1answer 107 views decoding this formula about nominal and real return [closed] I am sorry if the following question is not quantitative finance. I am reading this thing badly written lecture notes, which says$W^r_1 \equiv W_1/P_1^g = (W_0^rP_0^g)(1+R)=/P_1^g(1+R^r)\equiv ...
I have the Total Return Index(RI) for several companies. I know that I can calculate the log retunrs with $ln(RI_t/RI_{t-1})$. Therefore my first guess would be to ...