The returns tag has no wiki summary.
2
votes
0answers
49 views
Event studies using revenue data vs. measuring abnormal returns
This may be a silly question, but does there exist a methodology for examining the impact of "events" on companies that are not publicly traded? I suppose it would look at abnormal revenues rather ...
0
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0answers
64 views
Volatility of a rolling window strategy
What methods can be applied to determine the volatility of strategy using a rolling window? Using normal standard deviation would bias the results as the returns will be highly correlated. Although, ...
1
vote
1answer
120 views
How to download risk free rate?
I've been trying to download the national interest rates for some countries. When i use Datastream, it only gives me the currency return (while i need yield).
Can someone please tell how to ...
7
votes
0answers
127 views
How to estimate the following model?
Suppose I have the following model:
$$r_t=\sigma_t * \epsilon_t$$
where $r_t$ is the return at time t, $\sigma_t$ is the volatility, the model used to model this volatility is an exponentially ...
1
vote
1answer
84 views
How to deal with different amount of td's in computing Sharpe Ratio
In calculating the Sharpe Ratio, should I take into account the days were I have 0 return due to non-trading day? Another user posted a similar question but this was related to trading days with no ...
2
votes
2answers
96 views
Portfolio risk-return when assets have limited and inconsistent historical data / time series?
Lets say we have "today's" snapshot of asset allocation and need to determine the 6mo, 1 yr and 5 yr risk and returns of this portfolio. If the time series for every asset is very long, longer than ...
0
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2answers
192 views
5
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1answer
155 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 ...
4
votes
2answers
429 views
Daily returns using adjusted close
I want to chart the daily returns of a stock, and I'm using Yahoo finance data to download historic data. I was told to use Adjusted Close, but there seems to be an issue with this.
For ANTO.L, you ...
2
votes
1answer
92 views
Limits analysis
I have a few time series of models to analyse in terms of how far/close they are to their underlying limit. The limit is a simple value on the y-axis (always positive), and the series can act ...
3
votes
2answers
358 views
When gains are made: Overnight or during trading hours? What is the connection to volatility?
Falkenblog reports an interesting finding: All of the stock returns since 1993 are from overnight returns and cross-sectionally, volatility receives a positive overnight risk premium, a negative ...
1
vote
2answers
863 views
What kind of return can an average algorithmic trading firm achieve today?
What kind of rate of return can an average, equities-focused algorithmic trading firm expect to achieve today?
I come from a background of control and optimization, working in the industry in China, ...
2
votes
1answer
107 views
How to group mutual funds by volatility?
I want to group Mutual Funds by their volatility.
Ideally, I would like to end up with the mutual funds beings attached to different groups:
High volatility
Medium volatility
Low Volatility
My ...
2
votes
0answers
77 views
Probability Density of Returns of Bonus Certificates
Could anyone please help me with the following?
I need to generate a histogram (resp. probability density) of returns of a bonus-certificate.
A bonus-certificate can be replicated by an underlying ...
1
vote
1answer
2k 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 ...
2
votes
1answer
64 views
Accounting for Withdrawals
I am trying to wrap my head around the proper way to do this. I would like to simulate the portfolio value adjusted for inflation with a fixed withdrawal rate.
To simulate withdrawal rate, I will ...
0
votes
3answers
716 views
Appropriate method for calculating negative returns on a trading strategy?
I have a cumulative profit/loss time series below for a trading strategy, what is the appropriate way to calculate the returns in percentage for such a series?
My issue is the appropriate ...
3
votes
1answer
806 views
How to annualize skewness and kurtosis based on daily returns
I'm trying to annualize the four moments based on a string of daily returns (continuously compounded) for 11 years.
The formulas for the annualization of the mean and the standard deviation I did ...
1
vote
1answer
159 views
T-note returns from T-note yields … derivation of Damodaran's formula
Damodaran's historical data on 10-year T-note returns (found here) uses the following formula to calculate the 1-period total return on a T-note ($R_1$) given the 10-year constant maturity ...
4
votes
0answers
115 views
Is it more accurate to analyze returns on a calendar day basis than a trading day basis?
I'm rather new to the actual practice of this kind of analysis, but it just seems wrong to me to throw Mondays' returns in with the rest without accounting for the passage of time on the weekend when ...
-3
votes
1answer
125 views
Methods for distributing cash into allocation
Are there any methods/techniques that cover distributing cash into a specific percent of a portfolio asset class while gaining the best average price?
As a simple example, a portfolio starts with ...
6
votes
4answers
700 views
Using rolling returns in a multivariate linear regression?
I am trying to use fundamental factors such as PE, BV, & CFO in a multivariate linear regression with the response variable being the rolling 1 month returns. But this approach seems flawed as the ...
7
votes
1answer
714 views
Skewness and Kurtosis under aggregation
Returns possess non-zero skewness and excess kurtosis. If these assets are temporally aggregated both will disappear due to the law of large numbers. To be exact, if we assume IID returns skewness ...
6
votes
2answers
188 views
How do I statistically differentiate a series of prices from a series of returns?
I developed an optimization algorithm that uses returns (among other parameters) as input and basically output an allocation.
As I'm pretty happy with the results, I am in the process of putting the ...
2
votes
3answers
409 views
How to annualize dividends paid at varying intervals?
I am attempting to write a function that will calculate the annualized rate of return for individual dividends made by illiquid investments. These dividends are paid at varying intervals and the ...
8
votes
4answers
2k views
Should I use an arithmetic or a geometric calculation for the Sharpe Ratio?
What are the advantages/disadvantages of using the arithmetic Sharpe Ratio vs the geometric Sharpe Ratio? Is one more correct? Or is one better in certain circumstances?
-4
votes
1answer
1k views
How to annualize log returns? [closed]
I have daily log return from 01.01.2011 to 10.28.2011 and I'd like to compare the total return of that 10 months period (which is of -7.093%) to annual log returns of previous years.
I know it's ...
5
votes
1answer
308 views
Price volatility instead of return volatility for spread option parameter
I overheard someone at work today talking about a commodity spread option pricing model and he was asking our quant if he should use price volatility instead of return volatility as the volatility ...
5
votes
2answers
3k views
Calculating log returns using R
I am trying to calculate the log returns of a dataset in R using the usual log differencing method. However, the calculated data is simply a vector of zeroes. I can't see what I'm doing wrong.
Here ...
0
votes
3answers
753 views
How to model the daily return using intraday data?
Say, I have hourly returns $r_1,r_2,...,r_T$, where $r_t$ = $ln(p_t)$ - $ln(p_0)$ for $t = 1...T$. So what is the value of $E[r_t]$? Would $r_T$ be the $\prod{(r_t)}$?
Basically $r_t$s are the ...
4
votes
1answer
115 views
What are some common models for one-sided returns?
One typically models the log returns of a portfolio of equities by some unimodal, symmetric (or nearly symmetric) distribution with parameters like the mean and standard deviation estimated by ...
4
votes
1answer
306 views
Should cointegration be tested using close or adjusted close prices?
When doing cointegration tests should I use the adjusted close price or just close price for the time series?
The dividend of each stock is on different dates and can cause jumps in the data.
7
votes
2answers
411 views
What is a reasonable upper bound on the performance of a daily trading strategy?
I am backtesting an equity trading strategy which trades only once per day. Is there a general rule of thumb for the reasonable upper bound on the rate of return of such a strategy? For example, a ...
6
votes
3answers
466 views
How to calculate compound returns of leveraged ETFs?
Forewarning: this is a complete newbie question :-)
I am starting to learn about ETFs by trying to do the numbers. When learning about the compounding effect in leveraged ETFs, I wanted to simulate ...
5
votes
1answer
2k views
Annualzing the log of daily returns riddle
Two popular ways to measure returns are Arithmetic returns and Log returns. Let's define arithmetic (simple period) returns as: P(t) - P(t-1) / P(t-1). Let's define log return as Ln( P(t)/P(t-1) ) or ...
5
votes
3answers
3k views
Correct way to find the mean of annual geometric returns of monthly returns?
Say I'm given I set of monthly returns over 10 years on a monthly basis. What is the correct way to find the geometric returns of this data? I ask because a classmate and I are on different sides of ...
9
votes
4answers
2k views
Should Sharpe ratio be computed using log returns or relative returns?
I am trying to reconcile some research with some published values of 'Sharpe ratio', and would like to know the 'standard' method for computing the same:
Based on daily returns? Monthly? Weekly?
...
5
votes
2answers
935 views
Quantmod: what's the difference between ROC(Cl(SPY)) and ClCl(SPY)
I feel like I'm missing something fundamental here, but I can't shake the feeling that these two series should be equivalent.
/edit: there is also dailyReturn(Cl(SPY)). I've seen all 3 of these ...
-2
votes
1answer
199 views
Convert returns into an index? [closed]
What's the right way to take a series of returns and convert it into a continuous index? Let's say I want to show the performance of a strategy starting from 1, and adding on returns so that I get an ...
4
votes
2answers
235 views
Comparing Returns on a Sector Basis
I'd like to compare the returns of a portfolio segregated by groups to the returns of those groups in total. So say for example I have a portfolio with 40% Industrials and 60% Technology, then over ...
17
votes
2answers
554 views
How do you correct Max Draw-Down for auto-correlation?
When returns are auto-correlated, calculating a Sharpe ratio := $\frac {mean(x)}{\sqrt{var(x)}}$, (where $x$ are the returns) is complicated, but basically solved (see, e.g. Lo (2005)). Without the ...
