Questions tagged [performance-evaluation]

The tag has no usage guidance.

Filter by
Sorted by
Tagged with
1
vote
0answers
39 views

DGTW return adjustment

DGTW refers to the 1997 Daniel, Grinblatt, Titman, and Wermers paper available on Wermers' personal website. The general idea from what I have understood (please correct me if you think I'm wrong!) is ...
0
votes
0answers
33 views

Proper way to measure portfolio returns

I have a peculiar trading strategy and I can't seem to be able to find a proper way to measure its performance. Background: The strategy consists of buying certain stocks and then selling them in ...
0
votes
0answers
23 views

Funds Performance - Size Weighted (Negative Numbers)

I need to calculate the weighted median, average, sd of PE funds' returns. I weighted the sample according to the amount of committed capital of a fund, but I should consider negative products to ...
1
vote
0answers
22 views

Statistical testing of out-of-time portfolio performance (measured via a custom metric)

I'm testing (out-of-time) my machine learning (ML) based strategy against a strong benchmark. As a performance metric, I'm using a custom rolling metric $M(t)$ which takes into account the portfolio ...
2
votes
1answer
52 views

What are the eurozone bond indices? And where can I find them?

I am trying to calculate the performance of a portfolio of fixed-income funds domiciled and operating exclusively in Europe through a multi-factor model. To do this I need historical data of several ...
1
vote
1answer
76 views

Are there better performance measures for mean-reverting vs trend-following trading strategies?

The Sharpe ratio is often used as measure to assess risk-adjusted returns of trading strategies. However, there are also other measures that can be used to assess risk-adjusted returns like the ...
0
votes
0answers
50 views

What is a proper way to evaluate a backtested strategy if its trading asset has a strong trend?

I backtested a strategy that trades bitcoin, but I'm not sure if it's worth doing it because of the recent strong trend of bitcoin. The buy-and-hold has a better return, Sharpe ratio of the strategy ...
0
votes
0answers
30 views

Possible survivorship bias

I am quite new to studying finance so apologies if this turns out to be a trivial question. I am writing my first essay where I want to test a value strategy from 2009-2019 by yearly ranking of the ...
1
vote
0answers
41 views

Is “Information Coefficient” correlation or rank correlation?

From the textbook, information coefficient (IC) is a measure of the depth of an active manager’s skill. On a more formal basis, IC measures the “correlation” between actual returns and those predicted ...
0
votes
0answers
22 views

Performance Attribution - changing weights

I would appreciate it if someone could help me tackle this problem. I have daily data of returns for my portfolio, daily weights accounting for various portfolio changes. Could someone explain how I ...
0
votes
0answers
121 views

How is the total return of an alpha strategy being calculated during backtesting?

I am using a quant simulation platform and I have chosen a formulaic alpha to be used. Now the platform is backtesting and displaying the total return of the alpha strategy over 12 years. The trading ...
0
votes
0answers
21 views

Performance metric that integrates market volatility?

Is there a performance metric like Sharpe that takes into account the volatility of the current market instead of only the volatility of the fund? I believe investors may have different degrees of ...
1
vote
0answers
39 views

Mathematical proof of out-of-sample disappointment in portfolio performance being a function of a portfolio's variance

The minimum-variance portfolio is considered more optimal than the maximum Sharpe ratio (tangency) portfolio on the grounds that its in-sample performance is less likely to disappoint out-of-sample. ...
0
votes
0answers
31 views

Performance return of holdings if you know the returns of top10 holdings?

I think this is a simple question, but struggling to get my head around it. There is a fund that showcases its top 10 holdings and their respective weights. I want to infer the performance of the rest ...
0
votes
0answers
42 views

internal rate of return ((M/X)IRR ?) of a fund

I have the following data for a fund. The contributions come from the LPs (i.e., the investors invest more in the fund, or withdraw money from the fund), MV stands for market value. The timing is not ...
0
votes
0answers
99 views

Modigliani Squared (M2) and negative fund returns

I often see it quoted that the M2 measure offers an advantage over the sharpe, as sharpe is 'difficult to interpret' for negative returns. eg: https://en.wikipedia.org/wiki/Modigliani_risk-...
0
votes
0answers
31 views

Reliable metric to predict out of sample performance of trading strategy

How can one estimate the performance of a trading strategy on out of sample dataset? Yes, the good old model selection problem. Everyone knows sharpe ratio of your in-sample dataset by itself is a ...
1
vote
2answers
60 views

Performance measurement

When I regress the excess performance of a portfolio on the MKT Factor using daily data. I get a Beta of 0.95 and an alpha of 0.00011 that I annualize *252 = 2.77% I know that the annualized return of ...
1
vote
0answers
38 views

Is there a performance measure for the entire efficient frontier?

The Sharpe ratio is an example of a performance measure for individual mean-variance efficient portfolios, regardless if they maximize the Sharpe ratio or not. The efficient frontier, however, ...
1
vote
1answer
427 views

How to calculate a position's contribution to its portfolio's tracking error?

Say we have assets X (with weight $w_a$) and Y (with weight $w_y$) in a portfolio. X and B returns are correlated: $Cov(R_x, R_y)\neq 0$. The portfolio's tracking error is: $std(R_p - R_b) = std((w_x*(...
3
votes
2answers
230 views

Can alpha be positive if cumulative returns underperform the benchmark?

According to my portfolio analysis program (pyfolio), the alpha of the following strategy is .17 (I am assuming 17%). [Based on pyfolio documentation, alpha here is the "annualized alpha".] ...
0
votes
0answers
27 views

How to Compute the Return for a Series of Investments with Payouts?

I am looking for a metric to track the performance of investments in a security over time. I know what I have in mind but I am not sure how to map it onto a known metric. I want to answer the ...
1
vote
0answers
65 views

Why is Calmar ratio considered not to satisfy monotonicity?

We have the following definitions $\text{Gain-loss ratio} = \frac{E[X^+]}{|E[X^-]|}=\frac{E[X^+]}{-E[X^-]}=\frac{E[X]}{-E[X^-]}+1$; where $X$ are the returns, $E[X^+]$ is the expected gain, i.e. $E[X|...
2
votes
2answers
99 views

Definition of drawdown

Say I am considering the entire time horizon, is max drawdown what I've drawn in blue, or what's in purple? Likewise, how about the current drawdown for the period in black (in practice, I am asked ...
1
vote
0answers
50 views

How do Hedge Funds account for returns from short selling?

I was going over my notes from an Asset Pricing module yesterday and came across something interesting I hadn't thought about in a while. It was how Hedge Funds can over inflate their performance by ...
1
vote
3answers
394 views

CAPM and Beta: problem with regression (Beta is too low yet statistically significant?)

I have two time series of daily return calculated as $\frac{Price_{t}}{Price_{t-1}} -1$. One is the daily returns of a portfolio, the other the daily returns of the index (MSCI World). Period is 2020 ...
0
votes
3answers
425 views

Daily to Monthly Performance Attribution - Getting Effects to equal the Excess Return

I am building a performance attribution tool on Python to help us understand the asset allocation, stock selection effects of our fund. We are using daily price data for each component within the ...
0
votes
0answers
76 views

understanding the linear constraint on a regression performance report

I am trying to understand a regression performance attribution. The problem the code solves is shown below. min 0.5 * x'Hx + f'x st. Ax <= b So I have n ...
4
votes
1answer
359 views

Why use square root of companies market cap in the WLS matrix

When doing a regression based performance attribution I see that people normally use WLS. So that both our independent and dependent variables are multiplied by our WLS matrix, which is a diagonal ...
0
votes
0answers
115 views

What are the best metrics to evaluate an ML algo backtest, other than the nominal returns?

I have designed an algorithm that uses Support Vector Machines to classify the next day's price movement for several prominent cryptocurrencies on a ...
0
votes
0answers
44 views

Performance attribution and monthly rebalance: Is a month enough data to calculate Beta and Alpha?

A portfolio is built systematically by calculating scores and rebalanced each month to invest only in the 80 best scores. Scores change frequently and therefore the portfolio changes each month, ...
0
votes
1answer
60 views

Highest asset allocation contribution to the fund’s performance

I am preparing for 2020 May FRM II test and will appreciate any explanation for this question: In terms of asset allocation contribution, why is real estate made the highest asset allocation ...
1
vote
2answers
110 views

Outperform the market with a Beta lower than 1, is it possible? [closed]

I have a portfolio which seems to have outperformed the benchmark for the past 2 years however the risk system I use advises that using recent past data (lookback period of 2 years) the Beta to this ...
0
votes
0answers
31 views

Practical definition of stock rating scores

I am trying to understand the practical quantitative definitions of the stock scoring system (1-5) that can be commonly found in sell-side analyst predictions. For instance, a score of 3 suggests ...
2
votes
0answers
38 views

Relation between Sharpe ratio and amount of capital

In the book Quantitative trading by Ernest P. Chan, in one of the example we compute the Sharpe ratio of long-short strategy and one step perplexes me: In column L, compute the net returns for ...
6
votes
1answer
175 views

Alternative relative performance measure to Sharpe ratio for non-IID return

The Sharpe ratio is often used to compare the relative performance of portfolios despite its IID-assumption for the returns being violated. I can find ample warnings about the consequences of ...
2
votes
0answers
124 views

How to conduct an event-study for a single index (i.e the DJIA) with multiple events

I am a postgraduate student writing my thesis. I am somewhat a novice in the field I have chosen to study, however this has undoubtedly broadened my horizons. I am attempting to evaluate the impact of ...
2
votes
1answer
40 views

Composite portfolio performance

I'm trying to calculate the combined performance of two portfolios, but keep getting a nonsensical result. I have a Fixed Income & Equity portfolio and the GIPS quarterly performance number from ...
2
votes
1answer
57 views

ETF performance/returns

I was going over some ETF return data on yahoo finance and encountered some numbers that did not make sense to me. The image below shows a ytd return of 17.94% and 13.52%. I checked ETF.com and ETFdb ...
1
vote
2answers
750 views

How to calculate the Maximum Drawdown for a portfolio in MATLAB?

I would like to verify my approach of calculating the Maximum Drawdown for a portfolio in MATLAB. I've got a vector of returns for the portfolio, to which I add 1 for every return. Afterwards I ...
1
vote
1answer
141 views

How to calculate the daily rate of return for an actively traded account

I have a spot currency exchange account where the base currency is USD and where I can deposit and/or withdraw money from the account in any currency at any point in time. I can also exchange any ...
2
votes
1answer
484 views

How to compute cumulative performance of a portfolio with two equities?

I have a time series of adjusted returns for two companies, A and B. I have created a portfolio consisting of these two time series with equal weighting (sum of weights must equal 1): $w_a = w_b=0.5$...
2
votes
4answers
169 views

How likely it is that a strategy profits are explained by luck?

I want to evaluate a trading strategy. My goal is not to compare it with other strategies, but rather to determine how likely it is that the profits are generated from the strategy itself rather than ...
0
votes
2answers
328 views

P&L Calculation of Option Strategy

I have designed a call writing option strategy, where I am rolling the options upon expiry, i.e., my portfolio consists of one short call position at any given time. I have a time series of the value ...
1
vote
3answers
4k views

Is there a python library to generate performance metrics from returns of the strategy?

I am backtesting a strategy and have data generated from the returns of the strategy. Now I need performance metrics like maximum drawdown, Sharpe ratio, Treynor measure etc., I am writing functions ...
2
votes
1answer
455 views

Annualising Data

I have a 3 year performance track record of monthly returns. I am trying to calculate the Sortino Ratio, Information Ratio, Treynor index etc. In calculating the Sharpe Ratio I have multiplied the ...
2
votes
2answers
612 views

performance measure using pnl series

I have a time series of \$pnl of a strategy and nothing else. Can i use it to come up with some sort of a performance measure adjusted for risk? Is $$ \frac{average(\$pnl)} {sigma(\$pnl)}$$ ok to use ...
7
votes
3answers
223 views

Measuring alpha (Academia vs the Industry)

During academia, I learned to evaluate the performance of a portfolio by calculating alpha as the following: $\alpha_{i} = (R_{it}-R_{ft})-[\beta_i(R_{BMK_t}-R_{ft})]$ where $\alpha_i$ and $\beta_i$ ...
0
votes
0answers
203 views

Sharpe Ratio Calculation Best Practice

For Sharpe ratio formula : $SR(s) = \frac{(x_s - r)}{\sigma_s}$ where for the time period under evaluation : $x_s$ represents the average return of the portfolio $r$ represents average return of ...
1
vote
1answer
121 views

How to compute estimate performance with variable returns and days held

I have a trading strategy that results in a number of holdings, each of which has a variable number of days held, and obviously, return. So, for example, suppose I run a Monte Carlo simulation, and ...