Questions tagged [performance-evaluation]
The performance-evaluation tag has no usage guidance.
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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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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 ...
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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 ...
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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 ...
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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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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 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 ...
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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 ...
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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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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 ...
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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 ...
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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 ...
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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):
$w_a = w_b=0.5$...
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How to evaluate minimum-variance strategies against perfect information mvp
The minimum variance portfolio should minimize the standard deviation (variance) of the portfolio at time $t+1$. The covariance matrix $\Sigma_{t+1}$ needs to be estimated in order to form the mvp.
...
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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 ...
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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 ...
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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 ...
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Calculating 10-year Sharpe ratio for a mutual fund in excel?
Probably a very simple question but here goes.
I am looking to calculate the Sharpe ratio for some funds in excel (173 funds to be exact). The monthly returns I have are from January 2006 to December ...
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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 ...
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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 ...
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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 $\beta_i$ ...
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Log returns: volatility, outperformance, Sharpe/information ratios
I have developed the habit of simply stating that a 21% return compared to a 10% benchmark return means that the outperformance was 10% (not 11%). So, treating the whole thing in a multiplicative way, ...
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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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Testing the accuracy of a created Index
So long story short, I created a Oil/Energy Index from a basket of 5 stocks in the asset class.
I am looking to use mean-reversion, in order to help rebalance the allocation of funds between ...
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What returns to use?
I have monthly returns of my portfolio... I would like to summarize the performance over a longer period in one overall figure.
Should I use log returns per month then use geometric mean on the log ...
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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
$$σ_p^2 = w_x^2 \cdot σ_x^2+ w_y^2 \...
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Calculate Annualized Return / Annualized Sharpe From Portfolio
If I have a portfolio of stocks that I invest in and out of at different holding periods and different times of the year. How would one calculate the annualized returns and annualized sharpe ratio of ...
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Risk-adjusted returns ratio that does not reward high risk for negative returns
Think of Sharpe ratio, Treynor ratio, or anything where (excess) returns $r$ are divided by something that represents risk, $\sigma$:
$$\mathrm{performance} = \frac{r}{\sigma}$$
If the returns are ...
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average return Vs cumulative return interpretation
I am looking for the interpretation which distinguishes between average return and cumulative return.
I have two portfolios : the average return of portfolio 2 = 3 10E-4 per day while the average ...
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Computing the Sharpe Ratio
The building blocks of the Sharpe ratio—expected returns and volatilities—are unknown quantities that must be estimated statistically and are subject to estimation error.
The main problem I have is ...
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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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What is an accepted method to calculate percent PnL from a short position?
Calculating the normalized (e.g., percent or logarithmic) return on investment on a long (equity, call option, etc...) position is fairly simple. The percent return on investment for any position ...
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Calculate Sharpe ratio for only one return [closed]
I have only one return for calculating sharp ratio. As you know, we should calculate standard deviation of returns and standard deviation of one item is 0. Suppose that the single return is 0.1 and ...
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Diversification investment metric for a FI portfolio
What is a good investment metric to reward diversification within a portfolio. Suppose we have a fixed income universe and prefer stable currency, mid yield and mid tenors. Our stressed spread var ...
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Sharpe Ratio, risk free rate [closed]
when comparing the Sharpe Ratio (SR) of two different funds, does it make a difference, whether I use excess returs (returns - risk free rate) or returns (without dedcuting the risk free rate, ...
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What's the exact definition of alpha?
I am quite new to finance and I often hear people say 'I have 2 bps of alpha' or 'I have an alpha of two bps'
I don't quite understand what does this mean
For me alpha is about predicting power. At ...
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Sortino Ratio calculation
I've been using an Excel template to calculate the Sortino ratio for my automated trading strategies. http://investexcel.net/calculate-the-sortino-ratio-with-excel
Basically I input my monthly ...
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Sharpe ratio: discrete or continuous returns?
The Sharpe ratio is known as
$$SR=\frac{\mu-r_f}{\sigma}$$
Are these values calculated from discrete or continuously compounded returns?
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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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Performance attribution for personal portfolio - weight attribution
i am building a platform for portfolio analytics, part of which is a performance attribution module. Given that most individual portfolio's can never have the same number of stocks as say, a mutual ...
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Volatility of monthly performances, where the last month is short
I'd like to calculate the vol of a return series of, say, 25 months. However, the last of those months is not completed yet. The last data point only refers to the first 21 days of the month (say, ...
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Forex P&l Attribution on Physical Forward position
Please validate my unrealized Fx P&L calculation on the commodity forward contract e.g. consider i have bought 1 MT of wheat at 300 EURO my financial currency for company is USD. I am using below ...
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Risk-adjusted performance measurement: Log returns vs. simple returns and geometric vs. arithmetic mean return
I have just simulated 49 weeks of correlated returns on 5 different stocks, assuming returns being lognormally distributed. Next, I am supposed to assume that the simulated 49 weeks of returns ...
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Which one is best Performance evaluation measures?
I want to compare the performance of various volatility models like GARCH, eGARCH, and gjrGARCH from actual volatility(computed using high frequency data). I found 3 common performance evaluation ...
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Weights in Portfolio Attribution when considering Currency
I'm performing a simple Portfolio attribution with the Brinson 1985 model where returns are decomposed into both an allocation component and a selection. Using the formula, I first did the ...
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Calculating unweighted performance of stocks within a period
The well known calculation of unweighted index of stocks is just calculating an arithmetic average.
And then, to calculate the performance of the index, I calculate the %change of the unweighted ...
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How can I compare two mutual funds' performance with a sparse set of data?
I want to compare the performance of two mutual funds. The only data I have is annual returns for the past 7 years. So I have 7 observations for Fund 1 and 7 observations for Fund 2. In addition, I ...
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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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How to evaluate a success rate of a trading strategy
In order to compare various trading strategies, I am trying to calculate the success rate (the ratio of winning and losing trades).
While it is clear to me that this indicator is far from being an ...
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