Questions tagged [equities]

Shares of stock traded in a stock market. Equities represent the residual claim or interest of the most junior class of investors in assets, after all liabilities are paid.

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In which context do hedge funds use the Gauss Markov Theorem?

Hedge Funds really like asking questions about linear regression during interviews. Especially about the properties of the OLS. But I don't understand in which context this is used. For example the ...
confucius_is_confused's user avatar
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What is the current state of the art method to predict the equity risk premium one month ahead?

I am aware of Goyal, Welch and Zafirov's paper A Comprehensive 2022 Look at the Empirical Performance of Equity Premium Prediction that seems to imply there is nothing one can do to predict the return ...
volcompt's user avatar
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questions after reading the article by knuteson

I recently read this article by Knuteson and some thought/questions arose. So I was wondering if anyone read it or wants to read it and can comment on a few statements-questions below. I could ...
mark leeds's user avatar
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Rigorous formula for adjusted close price

I'm a mathematician who is new to the stock market, and I'm hoping to shine a rigorous light on a simple example of adjusting close prices for, say, dividends. Let time $t$ represent today. Say that ...
Andrew's user avatar
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Average correlations of stock returns

Say I had a pool of companies (specifically the Latin American Countries). The task was to work out the 'Correlation coefficient between the returns of any 2 companies selected from "different ...
Bossman Joestar's user avatar
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171 views

How to calculate holding period return of a long-short strategy?

I have daily close prices of two stocks, A and B. Suppose that we long stock A and short stock B. Assume that we do the long-short every day and hold that portfolio for some days. How to calculate ...
user546106's user avatar
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How do I measure the "dispersions" of a group of stock returns

I have $n$ stock return time series $X_1, X_2, ... X_n$. I want to measure how much they have "dispersed" over time. i.e. are they moving "more together" in 2023, comparing to 2022....
Matt Frank's user avatar
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Combining trading signals (equity long/short strategy)

Currently, I have developed three separate trading strategies on equity securities. All involve taking long and short positions in the top and bottom decile with respect to some measure (say, a ...
StackExchangeDisplayName's user avatar
2 votes
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What is the purpose of a floating interest rate leg on an autocallable equity swap transaction?

I understand that the purpose of the equity leg is to hedge the issuers exposure under the note but I don't understand why the buyer of an autocallable equity swap pays a fixed fee at the beginning of ...
Robert Smith's user avatar
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Is it possible to exchange one stock for another without cash as an intermediary?

According to my research, it is possible to exchange one stock for another without selling to cash and then buying the other. The process is known as a "stock-for-stock" or "share-for-...
anonim's user avatar
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Convertible Bond Option - Yield analyzis

The following problem can be understood as an extension/modification of the textbook example of Hull (Options, Futures and other derivatives, chapter 27.4, 9th Edition), which is related to ...
PAS's user avatar
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Option-like behaviour of momentum strategy

this may come as rather vague question, since I do not have something very exact issue on my mind. Nevertheless, I think this is an interesting question and must have been thought by some other people ...
blizzard16's user avatar
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Relationship Between the Equity Funding Curve and Equity Forward Curve

am trying to understand the core concepts of Equity Forwards Curve, Funding Curve and yield Curves (most sources online seem to focus on Interest rate related examples, so any sources for equity ...
ESN's user avatar
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Bound on path length of a stock price

Consider a time series $(S_i)$ representing a stock price (say close prices of one minute candles). Let $\Delta$ be a quantization step (could be the price step in the strike prices of the ...
TryingHardToBecomeAGoodPrSlvr's user avatar
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Marginal effect of asset in a strategy

Im trying to develop a stastical arbitrage strategy that depends on a universe of assets and in a brief way, they replicate some factor(s), index(s), etf(s), etc, and then trade residuals. So, after ...
NICOLÁS ZANNI's user avatar
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Purpose of equity listing?

I have a simple question on US stock market: what is the purpose of listing a stock to a specific exchange given that it can be traded on multiple exchanges? For example, apple stock (AAPL) is listed ...
beginner's user avatar
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Should I resolve factor collinearity before hedging?

Goal: I want to run a portfolio, daily or weekly rebalanced, with a target idio vol %. Thus I will be market neutral, sector neutral and maintain some style exposure at 70-80% idio overall. Okay, this ...
Arjun P.'s user avatar
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Risk adjusted returns for a portfolio relative to CAPM

This is very likely a simple question. When following Lewellen (2015) (open access here), how should I compute alphas for portfolio returns relative to the CAPM and FF3? Do we simply subtract the (...
Julien Maas's user avatar
1 vote
1 answer
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FM regressions for size groups when examining a cross section of expected stock returns

When doing FM regressions for size groups similar to Lewellen (2015) (open access here), should I obtain the cross sectional rolling return window betas using only the size group? (E.g only use large ...
Julien Maas's user avatar
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27 views

Power-utility function for calculating Certainty equivalent

I have a question regarding how i should calculate 3.2-3.4, currently studying for an exam. What i don't get is how to acctually derive the certainty equivalent from the expected utility of gross ...
Jens's user avatar
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Why stock beta is not equal to its index weight?

Index is a linear combination of stock prices with known weights. In case index is equally weighted, the weights are fixed. Beta measures stock sensitivity to index - by how much stock moves when ...
Kreol's user avatar
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If investors are risk-neutral, should the (equity) risk premium be zero?

I looked up ChatGPT and they stated that the (equity) risk premium should be zero for a risk-neutral world. The definition of a risk-neutral investor is that one is indifferent between additional or ...
KaiSqDist's user avatar
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If there was a way to back out implied volatility (IV) from a stock, would it be the same as the IV backed out from an option on that same stock?

I know that it is not possible to back out an IV for a stock, because the concept of IV is based on a model with underlying assumptions applied to pricing an option. I was thinking of why IV is ...
KaiSqDist's user avatar
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Why does cost of borrow have anything to do with the equity forward price?

By non-arbitrage, you buy the stock and hold it to the delivery date of the forward, only cost of funding (of cash) and equity dividend would be involved in the equity forward calculation. Where does ...
Peaceful's user avatar
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A term to compare 2 stocks based on simultaneous trending and ranging characteristics

There a 2 stocks called A and B. We take a look at the daily chart of both stocks over the last 1 year. On 90% of the days A and B both trended or at least one of A or B trended. On 10% of days both ...
FawaMop's user avatar
3 votes
1 answer
340 views

Should I use common equity or total equity for book value? (when replicating Lewellen's 2015 paper on a cross section of expected stock returns)

I'd hereby would like to ask if any of you know whether I should use common equity or the total equity value, when computing monthly BM ratio's as done by Lewellen is his 2015 paper on a cross section ...
Julien Maas's user avatar
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52 views

Calibration of Covariance Matrix for a Cumulative Period Return

I am trying to compute optimized weights (minimum-variance portfolio) for a cumulative return over a period (weekly or fortnightly). In a daily return setting, it is quite simple, I just compute a ...
KaiSqDist's user avatar
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Do Dividend Stocks Offer Better Resilience During Market P/E Contraction?

I'm interested in how stocks with higher dividend yields perform during periods of market P/E contraction. Specifically, I've observed that (so far I am working on the models): Market-wide P/E ...
johndonym's user avatar
1 vote
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Seeking a Model to Extrapolate Locate Fees for Short Selling in Absence of Historical Data

I'm in the process of developing an automated stock trading algorithm, with short selling being a significant part of the strategy. A key factor in deciding whether to short a stock is the associated &...
David's user avatar
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Why do we adjust the drift in the geometric brownian motion

I am building a monte carlo based on the GMB, and I am having a hard time understanding why we subtract 1/2 variance from the drift. If I have a drift of 12% and a volatility of 50%, that would give ...
John's user avatar
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225 views

Compounding vs Annualizing Returns in a Portfolio Optimization Context

This might be a rather basic question that might be closed... but I can't for the life of me understand why in many Google search results the annualization of daily returns is done like this: r_yearly ...
KaiSqDist's user avatar
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equities hedging betas for a cross-sectional risk model

This question is on equities risk models. I would like to know how to define betas when using a cross-sectional regression approach, rather than the time series approach. My goal is beta hedging of a ...
jam123's user avatar
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4 votes
2 answers
138 views

How is an equity TRS reflected on a balance sheet?

Suppose there is a hedge fund with with USD 50M cash and the balance sheet is below. Asset: 50M Liability: 0 Partner's Capital: 50M If the hedge fund executed a USD 100M notional TRS with 25% IA (USD ...
Tom Ho's user avatar
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How can this problem be defined formally?

Let's consider a straightforward example in which I possess a portfolio consisting of two stocks: $ R(t) = S_{1}(t) \cdot x_1 + S_{2}(t) \cdot x_2, $ Here, $t$ represents the time index, $R(t)$ ...
Barbab's user avatar
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1 vote
2 answers
276 views

Expected slippage based on % of average daily trading volume

I have started a quant strategy that buys and sells thousands of stocks. Each trade represents <1% of average daily trading volume. On average, the trades represent around 0.1% of ADTV. What is a ...
helloimgeorgia's user avatar
0 votes
1 answer
158 views

Why must the forward price be equal to the expected value for an underlying security [closed]

In page 59 of his book Option Volatility and Pricing, Natenberg argues that the forward price of an underlying security is essentially the market's consensus expected value for that security, ...
Matthew Kaplan's user avatar
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48 views

Selection of Risk aversion in portfolio optimization

I have a portfolio of equities with a cross-sectional score as expected return (mean=0) and am using mean-variance optimization. However, the question is how one selects the risk aversion parameter. ...
herminat0r's user avatar
0 votes
1 answer
107 views

For a university project I need the historical number of outstanding shares for all companies currently in the S&P 500

Up until now I have been using the yahoo finance api which provides lots of data already that I can use for my analysis. Unfortunately I need the historical number of outstanding shares for multiple ...
Valentin 's user avatar
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42 views

What happened when market status change from pre-market trading hours to standard trading hours?

Now we can place orders in pre-market trading hours, from 4 am to 9:30 am. And then we go into standard trading hours, 9:30 am to 4:30 pm. But I wonder then when will the Market Order Auction happen? ...
Parting's user avatar
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3 votes
0 answers
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Monte-Carlo method for multi-asset pricing

As I was working on this paper https://hal.science/hal-00319947/document by Emmanuel Gobet, I came across this paragraph that says to price a barrier option on (for example) two correlated assets, you ...
SVIJW's user avatar
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equities industry factor models

I am looking for references or practical solutions for the following. In the usual factor approach for equities with panel data regression (for each stock, explain future returns given stock ...
jam123's user avatar
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1 vote
0 answers
104 views

Calibration of LSV models to vanna/volga break-even

In this paper, Labordère, the author computes a probabilistic representation of the the vanna/vomma(volga) break-even levels. He mentions that they can be used to calibrate LSV models to historical ...
Greyearl's user avatar
1 vote
2 answers
118 views

Why do we need an ex-dividend date? [closed]

Why do we need an ex-dividend date? What is the problem with the ex-dividend date being the same as the payment date? Why are they separate? What problem does having a separate ex-dividend date solve? ...
s5s's user avatar
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1 vote
0 answers
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How to approximate a function in the H-model

I have been looking to understand the H-model in finance, that is used for stock price valuation. In particular, I wanted to formally derive the final formula: $$PV=\frac{D}{r-g_2}\left[1+g_2+\frac{H}{...
Mr. Ivan's user avatar
1 vote
1 answer
271 views

If the price of a stock follows a Geometric Brownian motion, then does stock return depends on past stock returns? [closed]

Got this question from my homework. I think if past returns are keep raising then current return should also be positive, but the answer is it's not related to past returns, why? I tried to ask ...
nearhome's user avatar
1 vote
0 answers
80 views

Questions on limitations of local volatility model

I am currently studying local volatility for equity models and I am trying to understand some limitations of the model: 1. under local volatility, the forward smile gets flatter and higher. Lorenzo ...
StochasticMan's user avatar
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0 answers
5 views

intra-day trading information (OHLC and volume) for YRIV for specific dates in 2018 [duplicate]

I am doing reseaerch at the University of Minnesota (where I teach) for a class in investment banking, using YRIV as a case study. How can I find intra-day trading information (OHLC and volume) for ...
Don Keysser's user avatar
-1 votes
1 answer
86 views

Why some stocks not traded today? [closed]

I try to download market daily data after US markets close. I found that the stocks in the following list have no data today. ...
Xaree Lee's user avatar
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2 answers
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Modeling the price of a stock based upon its dividend history

The value of a stock is the present value of all future dividends. This is sometimes called the Gordon Growth model. This model assumes that dividends increase at a constant rate. In the real world ...
Bob's user avatar
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2 votes
0 answers
105 views

Does the expected return increase with variance for stocks? [duplicate]

I took a historical dataset of ~2600 stocks and computed the 30-day returns for non-overlapping windows, for a 9 year period. For the returns, I computed the mean and variance. Then I plotted the mean ...
Botond's user avatar
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