Questions tagged [performance-evaluation]
The performance-evaluation tag has no usage guidance.
34
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How does one simulate intraday strategies which don't end up flat at the close?
I ran into this trying to simulate trading interlisted names between the NYSE and the TSX.
Depending on my strategy parametrization it would sometimes end up with a significant short or long dollar ...
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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 ...
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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|...
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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 ...
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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 ...
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kalman filter for a multifactor model in R
I am trying to set up a time varying factor model for the purpose of return decomposition via kalman filter.
Following this example and slightly modifying it so as to accommodate for more than one ...
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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} = (...
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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 ...
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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 ...
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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 ...
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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.
...
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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 ...
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373
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Portfolio risk decomposition using historical data: which weights to use for assets?
I am trying to decompose portfolio risk given historical returns of each asset in the portfolio. For a basic 2 asset portfolio, the portfolio risk is given as
$$σ_p^2 = w_x^2 \cdot σ_x^2+ w_y^2 \...
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Comparing two portfolio construction strategies
Suppose that I have two long-only portfolio construction strategies and that I backtest both of them on the same data. If I wanted to find out whether one of these methods would have outperformed the ...
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Fund Separation Theorem for Performance Seeking Portfolio
Can someone explain this statement?
"The beauty of the fund separation theorem is that the performance seeking portfolio mandate is the same for all investors"
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Jensen's alpha with timing activities
Why is Jensen’s Alpha not an appropriate measure of performance anymore, if the fund manager is a perfect market timer as stated for example in the Treynor-Mazuy-model or the Henriksson-Merton-model?
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evaluating portfolio performance without knowing the amount held on cash accounts
I would like to evaluate the performance of a portfolio mananger.
I know his trades, and the initial portfolio holdings. I do not know, however the amount held on his cash account.
That is, I ...
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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 ...
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164
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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 ...
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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 ...
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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 ...
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29
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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 ...
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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 ...
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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 ...
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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 ...
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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 ...
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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-...
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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 ...
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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 ...
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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 ...
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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, ...
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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 ...
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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 ...
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measuring the performance of round-trips on stocks
can you provide me with some ideas to assess the profitability of round-trips? That is when I buy 100 shares of IBM at 10\$ and I resell them two days later at 11\$, how can I measure the profit made? ...
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