Questions tagged [performance-evaluation]
The performance-evaluation tag has no usage guidance.
113
questions
0
votes
1
answer
46
views
Validation set on Walk Forward Analysis
When backtesting a trading strategy using Walk Forward Analysis/Optimization, I see people split each window into training and testing sets.
Suppose you want to select the best combination of MAs for ...
2
votes
2
answers
182
views
Assessing the GARCH model out-of-time
I have fitted two competing GARCH models, one GARCH(1,2) model and another EGARCH(1,1,1) both with t-distributed errors, on the ...
- 269
0
votes
0
answers
79
views
Bootstrap Reality Check - Why does it only assess the best trading strategy?
I wonder why White's BRC only determines whether the best trading strategy is statistically profitable.
What prevents us from comparing the average V of the second best strategy (i.e. square root of ...
1
vote
0
answers
49
views
Forward returns measurment?
Is there a common approach to measure how a forward contract is performing?
Here's what I'm thinking, each day you would price your forward with the next formula.
$$
F_t = S_0 e^{-r_f T}-Ke^{-r T} = (...
- 282
0
votes
3
answers
216
views
compounding component contributions
Say I have a portfolio which contains two components, A & B.
Below are the daily contributions to performance (0.02 equals 2%), where the overall portfolio return is equal to the sum of component ...
- 259
0
votes
0
answers
164
views
Performance Attribution and FX positions
I'm currently reading the book "Mastering Attribution" from Andrew Colin.
He first explains that you can separate the FX returns from the security return if the returns are continous ...
- 165
1
vote
1
answer
126
views
Confidence in Sharpe ratio given performance
Suppose I have a strategy that I believe has a Sharpe ratio of X - not the Sharpe ratio of the backtest (this can be absolutely determined), but the ratio I expect it will actually take on over the ...
0
votes
1
answer
99
views
Out of Sample Results Decay Rapidly With Prediction Window or Embargo
So I am beginning to dabble my toe into quantitative finance and am trying to validate some model results and am having difficulty thinking about what they tell me.
Here's my situation: I'm trying to ...
- 103
1
vote
1
answer
383
views
Understanding out-of-sample performance metrics for Realized Volatility
I fitted several models on a realized volatility process and then proceeded to obtain out-of-sample results. I'm struggling to interpret these results apart from to tell model A seems better than ...
- 431
5
votes
1
answer
1k
views
Information Coefficient (IC) Formulae Differences
I am learning about Fundamental Law of Active Management, and there seems to be two different Information Coefficient (IC) formulae presented.
Though I myself am not a CFA candidate, these appear to ...
- 185
0
votes
0
answers
99
views
What's the best proxy for a stock contribution to the portfolio returns?
I have a table of the weights of stocks in my portfolio for various periods and another with the returns that those stocks had for the same periods.
If I sum the product between the weights and the ...
- 101
0
votes
1
answer
273
views
What is a cumulative return series?
I guess this is pretty easy but I cannot find a definition anywhere. I am trying to reproduce a paper and they say they use a cumulative return series at some point. Does anyone know exactly what this ...
- 23
0
votes
4
answers
1k
views
Multi-Period Contribution
I've read multiple research papers but can't find a good answer as to why multi-period contributions don't add up to the returns of a portfolio. I understand that arithmetic sums miss the compounding ...
- 115
3
votes
0
answers
101
views
Assess forecasting performance of model in presence of bid-ask bounce
I have a forecasting model for 1-minute asset returns $y_t$ derived from trade data. (The assets are not very liquid.) The predictors of the model include the lagged target variable $y_{t-1}$, which ...
- 481
1
vote
0
answers
300
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 ...
- 253
0
votes
0
answers
59
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 ...
- 101
0
votes
0
answers
29
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
0
answers
29
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 ...
- 161
2
votes
1
answer
68
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 ...
0
votes
1
answer
246
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 ...
- 56
0
votes
0
answers
129
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 ...
- 11
0
votes
0
answers
48
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
1
vote
0
answers
169
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 ...
- 145
0
votes
0
answers
197
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 ...
1
vote
0
answers
81
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.
...
- 2,935
0
votes
0
answers
53
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 ...
- 157
0
votes
0
answers
255
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-...
- 1
0
votes
0
answers
41
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 ...
- 21
1
vote
2
answers
73
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 ...
- 87
3
votes
2
answers
127
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, ...
- 2,935
1
vote
1
answer
2k
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*(...
- 157
3
votes
2
answers
379
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".]
...
- 55
0
votes
0
answers
30
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 ...
- 101
2
votes
0
answers
158
views
May Calmar ratio be considered 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|...
- 21
2
votes
2
answers
152
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 ...
- 157
1
vote
0
answers
57
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 ...
- 637
1
vote
3
answers
735
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 ...
- 517
0
votes
3
answers
1k
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 ...
4
votes
1
answer
1k
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 ...
- 259
0
votes
0
answers
213
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 ...
- 637
0
votes
0
answers
125
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, ...
- 517
0
votes
1
answer
77
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 ...
- 171
1
vote
2
answers
173
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 ...
- 517
0
votes
0
answers
34
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 ...
- 101
2
votes
0
answers
51
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
1
answer
318
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 ...
- 63
2
votes
0
answers
222
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 ...
- 21
2
votes
1
answer
55
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
1
answer
66
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 ...
- 388
2
votes
2
answers
1k
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 ...
- 87