The asset rate of returns is the profit on a particular investment; it includes any change in the asset value, interest, commission or dividends and so, all other cash-flows which an investors receive or pays due to the investment.

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3answers
414 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 ...
14
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8answers
9k 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?
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1answer
57 views

How to convert Jensen's Alpha from monthly to quarterly observations

I am being puzzled while calculating jensen's alpha for single stocks. I have monthly returns data and have calculated alpha for each stock on a monthly basis (used 36-month rolling window for beta ...
4
votes
1answer
105 views

Comparing a money-weighted return of my own portfolio with a benchmark ETF/other portfolio that is subject to the same cashflows

I am able to calculate the money-weighted return (XIRR equivalent in Excel) of my portfolio. Whilst I can compare this with ‘headline’ returns of ETF’s, Mutual Funds etc, I want to isolate the timing ...
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2answers
45 views

s&p500 companies value vs growth

I was thinking of examining how the constituent companies of the s&p500 are affected by sentiment in crises. Is there any way to download stock prices for all the companies? Moreover how can I ...
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4answers
195 views

Market returns below risk free rate

Let's say I'm using CAPM to estimate the cost of equity, so I need expected market returns for the calculations. The standard approach is simply to compute arithmetic mean of an index (or rather its ...
-1
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1answer
60 views

Why do two perfectly negatively correlated assets not return 0%? [closed]

So, per the title, why would a combination of two risky assets that have the same exact expected return and standard deviation while being perfectly negatively correlated not return 0%? Why do you ...
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0answers
52 views

Calculating weekly portfolio returns for portfolios sorted by volatility

I am having some issues with finding the right code in STATA for sorting the data into portfolios by historical volatility (standard deviation) of returns and then calculating portfolio returns and ...
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0answers
7 views

Proxying returns for PE and Alternative Investments

The data for these asset classes don't go back very far. Anyone have any methods to proxy their "index" returns for analysis?
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0answers
32 views

Rblpapi-Getting different numbers than Bloomberg

I used the following code to pull day to day total returns (net dividends) from Bloomberg Terminal for a list of securities I have. When I compare my data using the GF function in Bloomberg, I am ...
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0answers
34 views

R:log return calculation for panel data structure

I have a long form panel for hourly prices of stocks. I want to do log return calculation for this panel data structure. This is sample data: ...
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0answers
14 views

Are the returns in this regression signed returns?

In this paper about combining multiple alphas are the returns signed returns? if not wouldn't they be mean zero? Also, it mentions "realized alpha returns" - does that just mean "realized" past alpha ...
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3answers
86 views

Calculating Portfolio Returns Across Sectors

I have a table of asset (mutual fund) returns and the percentage that each asset is in a particular stock sector: ...
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2answers
43 views

cumulative return calculation, disagreement

A friend of mine and myself are having an argument on how to correctly determine cumulative return. The dataset has monthly return data and we are trying to determine the 6-month cumulative return. ...
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0answers
27 views

student-t asset path

I am trying to simulate an asset path based on a t-distribution. I found a lot of ressources and the fact that it will be difficult to do a path. But now I changed my Geometric Brownian Motion ...
4
votes
0answers
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? ...
0
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2answers
75 views

Correlation between 2 stocks [closed]

If Stock A returns 5% on average in year Y And Stock B returns 2% on average in year Y Does this mean that correlation is 40%?
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2answers
120 views

Estimation of annualized volatility depending on data frequency - exceptions to the general rule?

From my understanding, the annualized standard deviation of daily returns is generally higher than of annualized standard deviation of weekly returns is generally higher than.... monthly...quarterly......
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0answers
24 views

Why do people use weighted regression with returns?

For example, by ADV. Intuitively it makes sense that a very liquid high ADV stock should carry more weight, but when I try it with some real life data I get higher standard error than unweighted...is ...
1
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0answers
49 views

Modelling log-returns and calculating the portfolio return

I know this might be a trivial question, however, I would be grateful for some clarification. I am working on weekly log-return data, doing volatility-foracasting using GARCH models and then using ...
4
votes
1answer
447 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 ...
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2answers
55 views

Portfolio return for assets held for different lengths of time

How does one calculate the return on a portfolio if the assets in that portfolio were held for varying periods of time? For Example: $t_0$ Buy AAPL at 100 $t_5$ Buy MSFT at 20 $t_1$$_0$ Sell MSFT at ...
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2answers
41 views

Portfolio Theory: Must VarCovar Matrix be based on return var/covar?

I am trying to estimate the minimum variance portfolio where the assets are currency derivatives. In the specific case it does not make sense to base correlations or variance on asset returns. I am ...
0
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1answer
27 views

Which rate of return to use in portfolio weight estimation?

I am learning the basics of portfolio management. I am confused about different ways to calculate rate of returns mentioned in the text investment and portfolio analysis. There are three methods to ...
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0answers
24 views

Calculating portfolio returns from a dynamic, optimal re-balancing strategy

I am calculating a dynamic strategy with optimal re-balancing as in here. As a result of maximizing the expected utility function I obtain the weight for the risky asset in period $t=0$. All such ...
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2answers
84 views

How to calculate annual returns from daily prices?

Suppose I have daily adjusted closing prices for SPY, for example from yahoo finance. How from this calculate annual return? Note: It's NOT about issues like 1.2 means 20% or 0.2 means 20%. The ...
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vote
2answers
207 views

Calculate weekly returns from daily stock prices?

If I have log returns for a specific stock, then the weekly log return is the log of Friday's closing price minus the log of Monday's closing price, i.e. $R_{weekly} = log(Price_{Friday}) - log(Price_{...
1
vote
1answer
54 views

Parametric bootstrap in generating returns and hypothesis testing

I am trying to test a hypothesis of a statistic calculated from portfolio returns. To do so I estimate a model on the original returns series and want to obtain 100 bootstrapped series using ...
3
votes
1answer
61 views

Expected returns vs expected prices?

This may be the most stupid question ever asked here, so sorry in advance for asking it. Suppose we have a single period security which gives dividend $D_{t+1}$ and has current price $P_t$. By ...
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3answers
24 views

find the qth lower tail quantile

I have daily currency returns. For each month, I have to find the return associated to the 5% lower tail quantile for each currency (the lowest return or the second lowest return). Could you please ...
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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 ...
1
vote
1answer
35 views

Calculate total risk [closed]

I have a question regarding how the risk is calculated, if I have only the returns. I think the risk premium (rp) is just the average of the returns and the sharpe ratio is the risk premium divided by ...
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0answers
70 views

How to calculate cumulative returns with one lag in R

I have a huge data frame with over 1000 column, which are companies(column headers) and in each column I have their estimated return(monthly). The sample period of the data frame in 11 years. I want ...
2
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0answers
65 views

VAR models for log-returns?

I am wondering if Vector Autoregression (and other autoregressive models) is a sound modelling for the daily (not high-frequency!) log-returns of time series from liquid financial markets. One can ...
4
votes
1answer
84 views

How does RAROC identify capital requirements?

I've read that RAROC is used to set economic capital requirements for different products, projects, business lines etc. Is it just a matter of solving for the required economic capital level to ...
2
votes
1answer
28 views

Compute the risk measured by the standard deviations $\sigma K_1, \sigma K_2, \sigma K_3$, does this have to do with weights?

Compute the risk measured by the standard deviations $\sigma K_1, \sigma K_2, \sigma K_3$ for each of the investment projects, where the returns $K_1, K_2$, and $K_3$ depend on the market scenario: $$...
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0answers
42 views

Intraday or overnight returns?

While calculating insider abnormal returns, closing prices of securities are generally used. We take the actual ex post return of the security i on time t, minus the expected normal return for the ...
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2answers
98 views

Volatility of EUR/USD: is this correct?

Let x be the closeBid price of EUR/USD, sampled every 5 minutes during year 2015 (historical data). This is the variation (is it ...
1
vote
1answer
100 views

Drivers of equity returns: dividend yield, change in P/E and dividend (or earnings) growth

In an NBIM paper I read the following: "... one can break down the total equity return into the dividend yield (the starting valuation), the change in the P/E ratio (the change in valuation) ...
0
votes
1answer
29 views

How to calculate 5 years return & STD for ETF?

I want to calculate by-myself 5 year return & STD for SPY ETF. What I did: Downloaded to Excel from yahoo finance historical data for the ETF (daily Adj. Close) from ...
3
votes
3answers
283 views

Computing Pooled IRR from the IRRs of parts

Suppose I have two cash flows: CF1: -10001001001100 CF2: -20020301 I can compute now: IRR(CF1) = 10% IRR(CF2) =-55% IRR(CF1+CF2) = 4.46% Is there a way to compute (or at least get a fair ...
1
vote
0answers
86 views

Determining the investment strategy

I have the following problem: Consider the 5 year investment strategy and given the yearly portfolio returns $S_{t+1}/S_t$ and dividends $D_{t+1}$ paid at $t+1$ which are modeled as: $\frac{S_{t+1}}{...
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0answers
35 views

returns series for daily strategy

I have a trend following OTC futures strategy which is trading a day-ahead commodity contract. If a signal is triggered the strategy goes long / short into delivery. The holding period of a contract ...
0
votes
1answer
51 views

VaR interpretation for positive returns

I used Extreme Value Theory to separate extreme negative returns from extreme positive returns, then, I calculated the VaR for both. I need to know what could be the interpretation of VaR for ...
-3
votes
1answer
201 views

How to compute simple and log portfolio returns?

I am looking for more details to perform simple and log returns for an entire portfolio. However, I've only been able to find the following semi-reliable source (see Page 9 and Page 19): Here are my ...
0
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1answer
466 views

How to calculate annualised tracking error?

I have 36 months of relative returns and I need to calculate the annualised tracking error. So, using 36 months of returns is it simply like below: ...
3
votes
3answers
97 views

Interpretation of t-test in event study with dummy regression

I am not sure about my interpretation of the t-ratios in dummy regression models for event studies. I have the results for two different groups of models examining the impact of news on stock returns ...
1
vote
1answer
104 views

Sharpe Ratio versus Cumulative Returns

I was asked whether Sharpe Ratio was a better measure than Cumulative Returns, in the context of hedge funds. To me, personally, Sharpe Ratio is a more important measure. By definition, it tells us ...
5
votes
2answers
204 views

Annualized Sharpe Ratio calculation

I'm trying to replicate the annualized Sharpe ratio of an buy-and-hold strategy for the Dow Jones Industrial Average index for a period consisting of multiple years. I got the daily DJIA (closing) ...
1
vote
1answer
51 views

Differences between dummy regression event study and regression on residuals from market model

I have two different event study approaches and I wonder if the results are exactly the same. Model 1 applies a dummy regression market model: (1) $R_{t}=\beta_{0} + \beta_{1}R_{mt}+\beta_{2}D_{t}+\...