Timeline for What benchmark/index to use for backtesting a portfolio of stock options?
Current License: CC BY-SA 3.0
8 events
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| Apr 17, 2012 at 19:44 | comment | added | Kiril | @JonnyBoats gotcha, thanks for the useful information! +1 for the answer btw! | |
| Apr 17, 2012 at 18:44 | comment | added | JonnyBoats | @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, 2012 at 18:40 | comment | added | JonnyBoats | @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, 2012 at 16:54 | comment | added | Kiril | Of course the "risk-free interest rate" is not really risk-free, but it's commonly referred to as such. I was just asking if that would be a good universal benchmark to test against. | |
| Apr 17, 2012 at 16:14 | comment | added | JonnyBoats | @Lirik - The concept of a "risk-free interest rate" is an illusion. All assets have risks, such as risk of inflation, theft, war etc. | |
| Apr 17, 2012 at 15:00 | comment | added | Kiril | I presume that this is where the risk-free interest rate comes into play, so the standard benchmark would be to compare your performance with the risk-free interest rate and see if you can beat it. The more circumstances you can beat it in, the better your algorithm. | |
| Jan 14, 2012 at 23:38 | history | edited | JonnyBoats | CC BY-SA 3.0 |
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| Jan 14, 2012 at 16:45 | history | answered | JonnyBoats | CC BY-SA 3.0 |