Questions tagged [expected-return]
The expected-return tag has no usage guidance.
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What methods do you use to improve expected return estimates when constructing a portfolio in a mean-variance framework?
One of the main problems when trying to apply mean-variance portfolio optimization in practice is its high input sensitivity. As can be seen in (Chopra, 1993) using historical values to estimate ...
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Intuitive explanation of stochastic portfolio theory
Fernholz and Karatzas have published various papers about so called stochastic portfolio theory.
Basically they say that the return to be expected from a portfolio on the long run is rather the ...
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Why the expected return rate of a stock has nothing to do with its option price?
OK, I admit that this is a frequently asked question. But I couldn't find a satisfying answer after I read the explanations of books, went through the derivations of B-S formula, and searched answers ...
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What are the assumptions in the first-stage of Fama-MacBeth (1973)?
According to the CAPM, the expected return of asset $i$ is:
$E(Z_i) = \beta_{im} E(Z_m)$
where $Z_m$ is the excess return on the market portfolio, and $Z_i$ is the excess return of asset $i$ over ...
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Portfolios from Sorts
Some time ago Almgren and Chriss proposed a method for portfolio optimization based on sorting criteria such as $r_1 > r_2 >... > r_N$ instead of explicit expected returns: see
portfolios ...
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What is the expected return I should use for the momentum strategy in MV optimization framework?
As all research on the momentum strategies are focused on the indicator, i.e. the entry point, there seems not much discussion on its expected return? Though there are some discussions on the exit ...
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How is option pricing related to the correlation between implied volatlity and the underlying?
The correlation between the index returns (e.g SPX) and its changes in option-impled volatility (e.g. VIX), is strong, stable and negative (the implied volatility feedback effect). To me at least, it ...
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T-statistics on monthly returns vs annualized monthly returns
eqI am very confused about a very basic question. This is probably more statistics than quantitative finance, but still, should be useful for this stackexchange board as well.
Let's assume I have ...
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Questions on continuously compounded return vs long term expected return
I have reading a paper from Oliver Grandville on long term expected return. I am trying to reconcile what I am reading in that paper vs what I see under "Application to Stock Market" in Kelly ...
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