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visits member for 2 years, 11 months
seen May 9 '12 at 19:51

Apr
17
comment What benchmark/index to use for backtesting a portfolio of stock options?
@Lirik - as to the appropriate benchmark to test against - it really should be the universe of investments you are allowed to pick from. So if you are testing a strategy on NYSE stocks, then use the average return for all NYSE stocks. Don't compare apples to oranges.
Apr
17
comment What benchmark/index to use for backtesting a portfolio of stock options?
@Lirik - it really depends on an individual's or institution's investment objectives. When a professional investor gives a money manager funds to invest he will define the benchmark for the manager. So when a large university gives a money manager funds to invest in the US equity markets they might use the S&P500 as the benchmark. Funds given to an investment firm in Europe might use the DAX. It would be highly unusual to give a fund manager investing in real estate in Japan a benchmark of the risk free rate for Swiss francs for example.
Apr
17
comment What benchmark/index to use for backtesting a portfolio of stock options?
@Lirik - The concept of a "risk-free interest rate" is an illusion. All assets have risks, such as risk of inflation, theft, war etc.