# Questions tagged [investment]

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### Constant maturity bond fund returns in downward sloping curve

Assume the following: we are running a constant maturity bond fund (10yrs) all zero coupon bonds to maintain the maturity, we buy bonds of 10y and sell the 9y bonds 1y later price of 10y bond is 100, ...
1 vote
37 views

### Drawdown distribution mentioned in Expert Trading Systems (John Wolberg)

In equation 2.13 of Chapter 2 (pg. 41), in his book "Expert Trading Systems: modeling financial markets with kernel regression," John Wolberg writes the probability of drawdown of $P$ ...
86 views

### Stambaugh inference for Investment Analysis when History Lengths Differ

This pertains to Stambaugh in the JFE (vol. 45, 1997 pp 285-331), and I have a question about Proposition 1 results (page 292). (link) To set the background, let's take the smallest relevant ...
43 views

### Real Options for investment valuation (Basics)

Thank you for checking out this post. I already asked a question once on this forum, and you did a great job helping me out with that topic, as I couldn’t have come across a solution myself. This time,...
359 views

### Invested Capital: operating approach vs financing approach

I've googled and read many articles about "ROIC" and "Invested Capital", but I'm still confused about how to calculate them. The best explanation I've seen so far is: Invested ...
1 vote
734 views

### How to Calculate ROIC (Return on Invested Capital)

I am trying to calculate ROIC based on data I receive from Yahoo Financials. A comprehensive output of what I receive from the site is below, which elements of this can I put together to get ROIC? <...
196 views

### Compute the (Net) Present Value

Let's have a project where we invest 1000 at the beginning of year 1 and 1000 at the beginning of year 2. At the end of year 2 the income is 2200 and the project is closed. Person A discounted with ...
668 views

### How to (efficiently) calculate the maximum possible return of a perfect "crystal ball" investment strategy?

I am new to the world of investing, so please excuse the clumsy wording of the question... there is probably a better term for what I am looking for or maybe this is even a known/classic problem. If ...
59 views

### Two specific questions about CAPM's assumptions and implications

I have two questions about the CAPM model: the first is theoretical while the second is related to observed market data. First question: let's say we have company A and company B and we want to ...
71 views

### Question regarding calculating Geometric Standard Deviation

I know GSD can be calculated by taking exponent of standard deviation of log return. My question is whether 1 should be subtracted from exp or should 1 not be subtracted ie exp(stdev of log returns)-1 ...
1 vote
128 views

### Interperting Negative Sortino Ratios

I noticed when both assets sortino ratios are negative the asset with the worse return and worse downside deviation has better Sortino Ratio. Is there a way to fix this?
53 views

### Open Interest on Stocks

According to the first bullet point in this explanation, "In the stock market, open interest is the number of buy orders submitted before the market opens. When the open interest is high, people ...
208 views

### How to incorporate ESG in Portfolio Optimization?

I currently have a potential investment universe of several thousand stocks and would like to calculate an optimal portfolio that incorporates ESG criteria as well as risk and return. The model should ...
76 views

### Why "hedging motives" and "heterogeneous preferences" are explanation for "under diversification puzzle"?

Han et al. 2021 documented something relating to the "under diversification puzzle": Standard explanations for under diversification include hedging motives and heterogeneous preferences, ...
120 views

### Why individual investors are attracted to lottery stocks is a puzzle?

Han et al. 2021 mention one puzzle in investment is individual investors are attracted to stocks with high skewness, so-called lottery stocks(...). This behavior is not consistent with standard ...
94 views

### Calculate interest

I'm kinda stuck with the following problem. I am given the terms in Month, a net-value, a residual value, and a monthly rate. Now my job is to calculate the interest. Usually I am giving the interest ...
107 views

1 vote
474 views

### NPV and efficient market hypothesis

If I have an opportunity of investment, let's call it investment (A), that costs $I$ in year 0 and gives me $CF_1$ in year 1, I will accept it only if $NPV>0$ $NPV = -I + \dfrac{CF_1}{1+k} > 0$ ...
1 vote
170 views

### Question regarding loan tape data when thinking about providing credit facility to bank

I have few questions regarding loan tape data such as this one: Data Say that I as a fund want to provide a credit facility to this bank and am given this loan tape data. (1) What observations / ...
1k views

### How exactly are corporate bonds priced at issue

I am interested in Debt Capital Markets but I am struggling to understand how bonds, particularly corporate bonds, are priced initially. I know that a company will tap an investment bank as book ...
1 vote
231 views

### What should I learn/know before reading Investments by Bodie Kane Marcus?

I hope this is the appropriate place to post this. If not, I would really appreciate if someone could redirect me to the right site. I've been seeing a lot of recommendations for the book, ...
207 views

1 vote
23 views

### Is there a standard name for subtracting time dependent risk free rates from PnL(Equity) curve?

When we subtract the time dependent risk free rate (Federal funds rate) from an PnL (Equity) Curve, what is the curve called?
169 views

### Comparing values of indicator between different stocks

I would like to ask whether there is a good way of analysing stock indicators that have no value limitations. For indicators like RSI we have a closed range ( 0 - 100 ) but in case of indicators like ...
364 views

### Why should long-term investors care about flash crashes/ intra-daily volatility/HFT?

I am wondering about implications of the speed of intra-daily trading on the wealth of an long-term investor. I am not necessarily asking about the costs of HFT trading to society but instead I wonder ...
178 views

### How did Dimson, Marsh and Staunton (2002) computed the equity index annual real return?

I was trying to read the triumph of the optimist, but it was almost impossible to see a well-written formula to show how the returns have been computed. In a simple sense, I do not know how the annual ...
75 views

### How to determine how much a company can invest in M&A activity?

I am an engineer who is increasingly interested in business-related things, and I am reading and learning a lot about what you can derive e.g. from financial statements. One question I was wondering ...
20k views

### True or False? An option's price will always be greater than or equal to its intrinsic value

Since if the option's price is lower than its intrinsic value (eg. strike price - current stock price for puts), then an arbitrage opportunity arises from buying the option at bargain and then ...