Questions tagged [portfolio-management]

The professional management of an investment portfolio of various securities (shares, bonds and other securities) in order to meet specified investment goals. The process includes the specification of investment objectives and constraints, choice of asset mix, formulation of portfolio strategy, selection of securities, execution, revision, and evaluation.

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How to calculate the log return of portfolio?

Suppose that we have five trades each day with these returns ($R_{day,trade}$) and we have 300 days in total: $R_{1,1}$, $R_{1,2}$, $R_{1,3}$, $R_{1,4}$, $R_{1,5}$ $R_{2,1}$, $R_{2,2}$, $R_{2,3}$, $R_{...
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Determine if stocks are hurt by rates or recession fear

Looking at a portfolio of growth stocks which traded at high multiples until end of last year. Stocks have been underperforming (no surprise there) but I'm trying to find ways to determine, ...
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Why are monthly active returns averaged? Should they not be multiplied?

I'm looking at this video: https://www.youtube.com/watch?v=fZmuJ2A9TC8 @4:43 but the issue is more general. Here the speaker is taking monthly active returns and averaging them ...
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Using the Fama-French 5 factor model in Panel Data

I have a question regarding the use of the FF5 Factors in an industry-fixed effects model. In order to clearify my question I'll post an example of my dataset Note that this is just an example, the ...
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Simple ways to size position without doing an optimization [closed]

Without doing portfolio optimization, how do long short portfolio managers size their positions?
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Intercommodity spreads interest rate futures notional and stdev

If I trade a TUT spread (2 2-y futures and 1 10-y futures) what would be the contract multiplier or notional value of a spread? The 2y has a notional of 200,000 with 1.5% stdev each while the 10y has ...
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Leveraged Porfolio Hedging

What is the right approach to hedge debt of 1 dollar who's value changes based on a basket composed of: 32 cents of short Asset A 26 cents long Asset B 43 cents long usd The debt is leveraged by 2....
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What is Leverage?

What would you consider leverage? I know this may sound like a basic question but I have spoken with several industry professionals with a significant amount of experience and all of them have a ...
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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 ...
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3 votes
1 answer
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Markowitz portfolio with factor/position constraints

General Markowitz-style optimization (problem objective of $w^T \mu - \lambda w^T \Sigma w$) yields simple optimal weights policy $w \propto \Sigma^{-1} \mu$. However, I would like to add a series of ...
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How to correctly use Fama-French factors (from investment portfolio perspective)?

I have several questions regarding Fama-French and other (for instance, BAB) equity return factors for practical purposes (portfolio construction, portfolio risk analysis, portfolio return analysis). ...
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How to calculate portfolio return and risk based on given scenario [closed]

I am interested to invest Rs. 1 lacks in security market. I have securities A and B for this ...
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Unexpected Inflation and Asset Allocation

If asset allocation decisions were made prior to the news of unanticipated inflation, how should asset allocators incorporate the fact the inflation is now 5% higher than the 2% inflation target? It ...
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Holding commodities in backwardation and contango

Because commodity futures curve are in backwardation, does it make sense for me to buy a back month with enough volume because as it approaches expiration, the price would converge with spot, which ...
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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 ...
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Portfolio optimization and decorrelating short term option payoffs

I'm looking to analyse whether one is better off selling OTM weekly covered calls, and rolling them, compared to selling monthly covered calls. There are some expectations on the yield so I cannot go ...
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mean-variance optimization === max sharpe ratio portfolio?

Noobie here. I just wanna ask a simple question: in the context of portfolio optimization, is Mean-Variance optimization the same as the max sharpe ratio portfolio?
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Determining the Capital Capacity of Strategies

I am trying to understand how the capital capacity of a strategy is determined. To be specific, if I was launching a vanilla long-short US strategy, how would I determine the max and optimal amount of ...
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Utility maximization given tangent portfolio

I am currently working on a following problem: Given risk free asset with return 1.1 and two normally distributed risky assets with returns (1.2, 1.3) and variances (4, 9): 1. Find weights that ...
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Sample Variance of Portfolio

Let $w$ denote a vector of portfolio weights, $r_i$ denote the $i$th return vector, $\Sigma$ denote the Covariance matrix of $r_i$ and let $\hat{\Sigma}$ denote the sample covariance matrix of $r_i$. ...
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Literature about optimal number of stocks in a diversified portfolio

Is there any recent paper on how many assets one should consider for portfolio optimization techniques? I found: – https://www.jstor.org/stable/2330969?seq=1#metadata_info_tab_contents – https://...
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What are the quantitative requirements to distinguish between asset classes?

What are the quantitative criteria to distinguish between asset classes? I ask this as many institutional investors are undergoing strategic and tactical asset class decisions at the moment. How ...
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Backtesting Hedged Equity Portfolio with Options

I am trying to find some papers and methodologies on backtesting an Equity portfolio with broad-based index options as hedge. For example, take SPY and systematically hedge it with 9 months 30 delta ...
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adjusting treasury futures exposure using micros

I want to decrease my exposure to a 10-year note futures by using 10-year micro futures after volatility-adjusting them. I've calculated that the difference in volatility in the micro has 5.125x the ...
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Fx futures pairs

I want to setup a pairs trade with the Japanese yen as the quote currency and Mexican peso as the basis currency. (long MXP vs JPY) 2 /M6J contracts, notional is 1,250,000 JPY = 10966.5*2 = 21933 USD ...
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characteristics of factor portfolios

In the paper Characteristics of Factor Portfolios (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1601414), when it discusses pure factor portfolios, it says that simple style factor portfolios ...
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Can you still sum the weighted up betas to find portfolio up beta, or not?

The portfolio beta in the conventional sense is simply the sum of weighted beta coefficients for each holding in the portfolio. Is it the same for portfolio up and down beta, where I can simply take ...
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How to calculate increases in equity of a valuing asset

I would like to know how to calculate equity of an owned asset. My problem specifically is that I own a BTC wallet and have some family members contributing to that wallet as well. Having person A B ...
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Difference between eurodollar and 2 year note futures

What's the difference between these instruments? I know that the Eurodollar is for dollars outside of the US, but is there any material difference other than contract size when it comes to trading ...
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Portfolio optimization with Python/CVXPY: DCPError

I'm trying to implement a script for portfolio optimization on a sample universe of 3 future contracts. I have the following inputs: current allocation --> number of contracts currently held for ...
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Easy, but doubts - Annualize daily turnover

I am fairly certain I am correct but I just want to double-check on portfolio turnover calculation. I need to annualize the daily turnover rate. To calculate, the daily turnover, I am using the ...
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backtesting guide for research

I am a master student in finance and I am working on my portfolio management thesis. Within my thesis I will have to backtest a portfolio strategy for a balanced portfolio. I am looking for a guide/ ...
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Eurodollar futures volatility

Considering each point is 2500, how can I get the volatility of the jun 24 contract? On tastyworks I'm seeing a 0.7% iv for the contract, how can I translate it to standard deviation? Ex:sp500 15%...
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Shrinkage of the Sample Covariance matrix, theory

is there any theory behind the covariance matrix shrinkage paper, why it works? I am talking about this stats exchange thread
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What are some references for risk management of professional equity fund portfolios?

In particular, I am looking for methodologies for equity portfolios that are primarily managed by fundamental-based methods rather than quantitative strategies. Even though the portfolio is not based ...
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Why techniques for portfolio optimization do not take into account the non-fractionability of stock prices?

In a market with 3 stocks: Stock A with price 25.00 USD; Stock B with price 32.50 USD; Stock C with price 50.75 USD; Any portfolio optimization technique results in a vector of asset weights $\...
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Matrix with two columns - ESG Momentum Strategy

Background: I am conducting some research on equity returns on portfolios sorted on ESG Scores from Asset4. Specifically, I am trying to test if trading on long-short ESG momentum portfolios yields ...
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Calculation of Fama-French risk factors

Background: I am conducting some research on equity returns across Denmark, Finland, Norway and Sweden. The analysis is seen from a Danish investor’s point of view, and therefore I have currency ...
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how to do hedging in global market give the time zone issue [closed]

Hi I am considering a question: Give you have a global portfolio, consisting of U.S stocks, Euro Stocks or even Japan stocks and you have to rebalance daily according to my calculated trading signals. ...
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CURRENCY ADJUSTED RETURNS: How to adjust stock returns in foreign currency (e.g., EUR) to local currency (USD)?

I have collected monthly stock returns (in %) denominated in EUR and exchange rate EUR/USD. I am trying to adjust the monthly stock returns denominated in EUR to monthly stock returns denominated in ...
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Should I include zeros in downside beta calculation?

Downside beta is the beta coefficient for an asset and a benchmark restricting benchmark returns to be less than a given value. Let’s assume zero for simplicity. We have: If we have returns in period ...
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Why additivity assumption holds in CAPM and factor models? (Screenshot of a textbook included) [closed]

All the excerpts are from the book investment, written by Bodie. At the bottom of this post, I attached pages of the the book that show a related part of my question. Question 1. Why the variance of ...
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Currency hedging 3 month sterling libor futures

Each libor contract is 500,000 gbp. Can I hedge it by going short 8 gbp/usd futures per libor to hedge out currency risk considering each gbp/usd futures is 62,500 British pounds?
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Long Breakeven inflation

I want to go long bei by going long individual 10 year tips and short individual 10 year treasuries. How do I calculate and match the duration?
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python portfolio tracker

any recommendations for a portfolio tracker that updates from csv ( or websocket but that would need to come with an active github and hopefully a man page). New to python, mainly creating charts from ...
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-1 votes
1 answer
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Yield curve steepening/flattening using different duration treasury futures (TUT Spread) and volatility

Yield curve steepening: long 2 contracts 2 year (2 contracts due to contract size), short 1 contract 10 year Vice versa for flattening. If the 2 year note has a expected volatility of 2% per contract (...
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What is portfolio leverage?

The definition of leverage is: $$L = \frac{\sum_i |H_i|}{C} $$ where $C$ is the amount of capital, $H_i$ is the size of holdings in asset $i$. This strikes me as a weird definition for several reasons:...
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What is this return contribution methodology called (Multi-Period Contribution)

In reviewing the recently answered, below question Multi-Period Contribution I think the top answer (calculating weights at the end of each period) results in a method which does allow for multi-...
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sizing fx futures trades by targeting volatility

If I lever up a JPY/USD futures with a 6% volatility/contract 2x to meet my 12% volatility target, how many contracts should I buy per $100,000 I have in liquidity? How do I size my position based on ...
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How do you hedge your inventory when doing arbitrage?

Say I want to do arbitrage between Exchange A and Exchange B on USD/AAPL. This requires that I hold equal parts USD and AAPL. I don't want exposure to the movement in AAPL. How do I hedge my AAPL ...
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