# Tagged Questions

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.

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 ...
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 ...
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 ...
1answer
106 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 stocks....
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? ...
0answers
169 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 ...
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 ...
0answers
46 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?
0answers
168 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 ...
0answers
75 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 ...
0answers
193 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 ...
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 ...
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 ...
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 ...
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: ...
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 ...
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
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 ...
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86 views

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### Confused on interpretation of betas/alphas in regression in finance

I ran a regression on two stocks. I don't have the data in front of me, but it is a more conceptual question. Let's say SP500 returned a total 23% return over this time period and MSFT returned 9%...
0answers
69 views

### Calculating Asset Returns

The question pertains to a simple phenomenon. There is gold futures listed on Exchange A and Exchange B. Exchange A and Exchange B overlap times with A and B starting 8 hours later and A and B ...
0answers
69 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 <= ...
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240 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 ...
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75 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 $X_t$ ...
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683 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: ...
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106 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 ...
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88 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 ...
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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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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 ...
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 ...
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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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 ...
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 ...
0answers
61 views

### Stats and Hedge Ratio calculation questions

I did self-study and learnt some concepts to build a multiple leg spread /portfolio for trading but still confuse in some basic concepts. I will be very thankful if you can answer my couple of ...
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37 views

### Relationship between yield spread and stock returns

I would like to ask the following question: Do yield spreads generally have a relationship with stock market indices like the S&P 500? If so, what kind of relationship? I have looked at numerous ...
0answers
31 views

### Poor investment preformance in early years impacting on final fund value

I am currently doing some work on the performance of funds across different models of the economy. I am trying to find some work that looks at the impact of poor/lower returns at the early years of ...
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53 views

### Regressing NYSE returns: Lagged intercept term & efficient market hypothesis

By performing the following OLS time series regression, $y_t$ = $\beta_0$ + $\beta_1$*$y_{t-1}$ + $\beta_0$*$y_{t-1}^2$ + $\epsilon$ I cannot reject the null hypothesis that b1=b2=0. However, ...
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21 views

### dynamic programming with serially independent returns

Book suggests that "asset returns are assumed to be serially independent, so wealth is a single state connecting one period to the next". I understand path dependency is lost in case of serial ...
0answers
423 views

### How to calculate returns of backtested strategy?

Lets say I have some strategy (long/short) backtested for certain period. Strategy has entries/exits only at the end of the day and may have overnight positions hold. Now I would like to compare ...
0answers
58 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 ...
0answers
402 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 ...