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2
votes
3answers
93 views

Calculate bond returns from yields

I have to construct and evaluate portfolio of bonds and stocks, namely I need to get return on portfolio, standard deviation and sharpe ratios. I have weekly data that contains stock prices, and I ...
2
votes
2answers
55 views

Problem when calculating the daily return on a forex trade, what is the best way to do such a calculation?

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 ...
2
votes
1answer
118 views

Predicting stock returns - in a panel data specification or by using portfolio formation strategies?

I'm working on an empirical analysis where I try to predict stock returns using weekly data. Ideally, I would like to use a panel data model like the following: $$ ...
6
votes
2answers
264 views

How do Return.portfolio and Return.rebalancing work in Performance Analytics in R?

I have a question about the function Return.portfolio/Return.rebalancing from the Performance Analytics package in R. I take ...
2
votes
2answers
236 views

How to classify stocks by their volatility?

I would like to hear other possible ways of classifying Stocks by the Volatility of their returns. Assuming that I want to characterize each stock as Low, Medium or High Volatility Stock and assuming ...
1
vote
2answers
214 views

Correlation between S&P500 returns and 10y US Treasuries yields

I'd like to investigate the comovement of stock index returns with bond yields but I don't know which return's duration to use (1-year, 1-month or anything else) to get a better view of the ...
0
votes
0answers
26 views

How to compute return of a variance swap?

How does one calculate the investment of a zero initial investment asset, specifically a variance swap? In this asset the payoff is given by the difference between the realized variance in a certain ...
0
votes
1answer
55 views

Is there any relationship between investment return of a stock, for individual year (Yearly return) and multiple years (Overall annualized return)

currently, I'm calculating the return of a stock, for individual year and multiple years. I tend to answer the following question. Return of a stock for end of year 2010 (Individual year) Return of ...
1
vote
0answers
65 views

robust regions in grid search

I have a strategy f that takes parameters x,y (for x,y taking values in integer ranges). I get two grids (of returns and volatility values) from computing f(xi,yi) for integer ranges x1 <= xi <= ...
0
votes
2answers
49 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 ...
2
votes
1answer
51 views

Weighting several returns over different time frames

I have a set of annualized returns over 4 time periods: 10yr, 5yr, 3yr and 1yr. Is there a way to weight each return to have a "more representative" return?
0
votes
1answer
34 views

What does 2 Year Annualized mean compared to 1 Year Annualized

I am looking at a company's financial report and there is a table in it that lists returns over different annualized periods. It ranges from 1 year to 20 years. Would a 2 year return in this table be ...
1
vote
0answers
123 views

trading strategy outperforms passive strategy in absolute terms, but in returns vice versa. how could this be?

Background: I want to compare two trading strategies in term of profitability. The red one is an active trading strategy, which involves many entry and exit to a specific market. The blue one is a ...
4
votes
2answers
376 views

Looking for C# library that provides/contains performance analytics

I am looking for a C# .Net library that provides trade performance analytics similar to R-PerformanceAnalytics. Basic return statistics, draw-downs, risk-adjusted returns, risk (variations), ...
3
votes
1answer
141 views

Estimating Beta from unevenly spaced price history

I have a certain non-stock asset that has 1 transaction every 1 to 8 months. I also have a price index of that class of asset compiled by another party on monthly basis. If I regress $price = \alpha' ...
0
votes
0answers
26 views

Real returns vs. inflation as an independent variable

Assume a model like this, basically explaining stock market returns with a bunch of stuff: ...
2
votes
2answers
341 views

Definition of Return of A Long/short Portfolio

This can either be a silly question or a question with no sure rigorous answer but defined with some convention. Any way, here it is. What is the (industrial recognized) definition of the return of a ...
1
vote
0answers
40 views

Econometrics - Granger Causality

Suppose we have two time series, if one has autocorrelations and the other is non stationary how do we test whether they Granger cause a returns series?
2
votes
1answer
53 views

Attributing change in yield as a result of structural change

Suppose your portfolio has $w_0$ amount of bonds with yield $r_0$. Now you buy additional $w_1$ amount of bonds with yield $r_1$, then buy additional $w_2$ amount of bonds with yield $r_2$. ...
1
vote
0answers
66 views

Sampling and/or asymptotic distribution of a function

Assume we have the following function: $$f(p) = \frac{1}{(1-p)d}\ln\left(\frac{1}{T}\sum_{t=1}^{T}\left[\frac{1+X_t}{1+Y_t} \right]^{1-p} \right)$$ where $d$ is a constant $T$ is a constant $X_t$ ...
1
vote
1answer
340 views

What are DGTW adjusted returns?

Many papers, e.g. in The Journal of Finance, discuss DGTW adjusted returns (or DGTW abnormal returns) instead of just returns. What are these and how does one compute them?
2
votes
2answers
231 views

Calculate Daily Returns for Sharpe Ratio

For the purposes of Sharpe ratio, I calculate a trading strategy's daily returns using realized P/L only: $$ \frac{K(t + 1) - K(t)}{K(t)}, $$ where $K(t)$ is the cash balance after market close on day ...
2
votes
0answers
109 views

Correlation between idiosyncratic residuals and forward returns

The classic mean-reversion strategy is to calculate an "expected return" (alpha) by computing the raw return for each security and then remove the part which you think is market driven. Statistically ...
4
votes
2answers
174 views

Multifractal Model, Generating Sample Paths with Correlations between Assets

I have studied option pricing using Geometric Brownian Motion to generate sample paths. Because of the normal distribution, it is easy to create a covariance matrix and get correlated asset returns. ...
1
vote
0answers
416 views

How to estimate market integration parameter in Singer-Terhaar model for E(r)?

Singer-Terhaar is part of CFA II and III curriculum. It estimates risk premium for some asset, traded at some local market, as weighted average of expected premiums for the case of (1) local market, ...
3
votes
2answers
261 views

Calculating and interpreting cumulative returns is R

I have buy and sell signals,and accordingly, I artificially generate a signal series,for which,I assign 1 to every buy and -1 to every sell: ...
-1
votes
1answer
98 views

Rate of Return Required on Buying Stocks with Loan

A bank gives a loan $L$ for $m$ months and the monthly interest rate is $i$. The bank requires monthly installments - which I calculate is $I = \frac{L}{m} + Li$. I use this loan to buy ...
0
votes
4answers
491 views

compute sharpe ratio for options?

Calculating sharpe ratio for shares is a straight forward task: (average returns - risk free ) / standard deviation. However i remain baffled as to how to tackle the task for options, can someone ...
1
vote
2answers
1k views

Calculate Average Price, Cost, (Un)Realized P&L of a position based on executed trades

We have built an algorithmic trading software and need to calculate the following parameters for each position in our portfolio. Average Price Cost Realized Profit & Loss Unrealized Profit & ...
6
votes
3answers
463 views

Testing the validity of a factor model for stock returns

Consider the following m regression equation system: $$r^i = X^i \beta^i + \epsilon^i \;\;\; \text{for} \;i=1,2,3,..,n$$ where $r^i$ is a $(T\times 1)$ vector of the T observations of the dependent ...
1
vote
0answers
351 views

Long/Short portfolio return

Suppose I have a Po with one long, one short positions and some cash (to balance the short + 50% margin) as shown below: ...
0
votes
0answers
188 views

what is a reasonable beta in CAPM?

I want to predict expected returns for assets using a CAPM, to calculate unexpected (unpredictable, idiosyncratic, non-systemic) returns in portfolios. My CAPM estimated on monthly total gross ...
1
vote
1answer
83 views

right benchmark for an incompletely diversified international portfolio (for a CAPM): MSCI World or MSCI ACWI IMI?

I want to calculate annual excess returns on portfolios using monthly returns for a CAPM (for the assets in the portfolio as well as for the benchmark), in order to have more information on the ...
1
vote
2answers
69 views

different amount of information on return correlations from shorter and longer periods?

I want to calculate annual excess returns on portfolios using monthly (total) returns for a CAPM (for the assets in the portfolio as well as for the benchmark), in order to have more information on ...
0
votes
1answer
826 views

how to chain monthly excess returns into annual?

I want to calculate annual excess returns on portfolios using monthly returns for a CAPM (for the assets in the portfolio as well as for the benchmark), in order to have more information on the ...
2
votes
0answers
189 views

comparing total returns from various data vendors

I need to use various data sources to cover all of my data, and I am concerned by the discrepancies in total returns. Data vendors were helpful, but their simple documentation did not help resolve why ...
1
vote
0answers
85 views

Insignificant or significant explanatory power over risk adjusted returns?

Currently iam working on my master thesis which is about risk adjusted returns in the Asia Pacific REIT market. The goal of the paper is to determine/find variables that conceive explanatory power ...
2
votes
1answer
234 views

annual excess returns from CAPM on monthly total returns

I want to calculate annual excess returns on portfolios using monthly returns for a CAPM (for the assets in the portfolio as well as for the benchmark), in order to have more information on the ...
0
votes
0answers
62 views

% Return on backtest with variable positions and notional amounts

I have a 14 year backtest for a systematic strategy that uses a static notional per each position. On any given day I could have multiple positions long and short and notional long and short. How do ...
2
votes
2answers
205 views

Block Bootstrapping Relative Returns

I want to run a block bootstrap on the relative returns, but I'm not sure if subtracting the mean is important. A bootstrap sequence is a synthetic sequence generated using the original sequence. If ...
2
votes
0answers
70 views

FRA-Strategy: Make 3-month and 1-year Excess returns comparable

I am trying to analyze an investment strategy that tries to exploit the empirical difference between forward interest rates and realized spot rates. I am using FRAs to capture the difference. I am ...
1
vote
1answer
350 views

Portfolio software that shows 'total return' for each investment

I'm a high school technology teacher and sponsor for the Charity Student Investment Project. Currently our students track our investment portfolio via a google spreadsheet ...
0
votes
1answer
440 views

How to adjust local currency returns to US$/EUR return?

Iam doing research on return characteristics. As of today the scope of the research has changed from a local investor point of view to an international investor point of view. This basically means ...
2
votes
0answers
137 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 ...
3
votes
2answers
412 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
325 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 ...
10
votes
2answers
362 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
139 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
193 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 ...
1
vote
2answers
488 views

Calculating Momentum From Returns

I am doing some modelling and have some data: ...