# Questions tagged [portfolio]

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### Value weighted Portfolio: Include Market cap of pref shares?

I got Datastream MV data for my sample and i want to exclude Preference Shares. Since Datastreams definition of MV is shares*price there are two Marketvalues, one for common stock, one for preference ...
31 views

### Factor model alternative? [closed]

Suppose there is a Fama-French model estimated for a stock of Shoemaker Ltd.: $α = 0.01$ $β_M = 0.9$ $r_M = 0.12$ $β_S = 0.3$ $S = 0.05$ $β_H = 0.2$ $H = 0.06$ $r_F = 0.03$ How would you ...
39 views

### Eliminating factor risk?

Suppose there are two risky assets, related to the same risk factor $f$. $r_1 = μ_1 + β_1f$ $r_2 = μ_2 + β_2f$ There is also a risk free asset available at $r_f$ How do you eliminate factor risk ...
75 views

### Adjust calculation of Sharpe ratio when portfolio is subjected to cash outflows

I have a portfolio with cash and marketable securities, a benchmark, and a desire to calculate its Sharpe ratio. However, this portfolio has cash outflows. Sometimes securities are sold to produce the ...
59 views

### Definition Of A Portfolio

I have very recently started studying quantitative finance on my own through a book called An Introduction To Quantitative Finance by Stephen Blythe. In chapter 6 of his book, he sets out to prove ...
80 views

### How do I know what my portfolio weight constraints are given to me by my broker?

I have started exploring portfolio optimization results that pop out when I don’t constrain the weights to sum to 1. For instance, in a dollar-neutral portfolio, the weights sum to 0. Also, some ...
56 views

### Calculation of the risk free rate

For portfolio management I need the risk-free to compute the sharpe ratio. I would like the use to rate on the 3 month treasury bill from the US. https://fred.stlouisfed.org/series/TB3MS#0 The ...
34 views

### Given multiple strategies with their ER, volatility, how would I calculate the combined Sharpe?

Without knowing the actual daily returns, I have a table something like this: ...
157 views

### Measuring returns

always come across the issue of which return to use. There a three types that I know about. The simple return, the log return and the geometric return. Now I wonder whether it depends on the subject ...
75 views

### Portfolio return with changing assets over time

I need some feedback on a very basic question regarding the calculation of the portfolio return. I have created an example of a portfolio with two assets and attempted to calculate the return: I've ...
51 views

### Value of portfolio with fixed discrete dividends

I know that this is a very simple question, but i want to make sure to grasp the concept of ex dividend and value of portfolio. Suppose that we have a two period binomial tree of a stock with initial ...
247 views

### Calculating Correlation of Two portfolios?

So I'd like some help w/ this question. Given 3 assets with means, variances, and correlation: Two portfolios are created (A and B), each with the three assets above with weights ($w_n$) as follows: ...
480 views

### How to calculate optimal portfolio using sector constraints in python

I'm looking into CVXPY at the moment. Main goal would be to be able to calculate the optimal portfolio, which in my opinion would mean that we need to maximise (expected return - risk free) / ...
380 views

### Widely accepted methods for coming up with the co-variance matrix of assets?

Question What are the widely accepted ways for coming up with co-variance matrix of assets after the Markowitz's modern portfolio theory? Question explained in more detail After Modern portfolio ...
136 views

### Do cash accounts contribute to exposure?

When calculating a portfolios total exposure, should the value of the cash accounts be included? My high level view on exposure is that it should be related to the possibility of loss, usually as a ...
63 views

### Correlations between different baskets of assets

Struggling to see the answer to the following problem - Assume you have $N$ different assets, and all pair-correlation coefficients $\rho_{ij}$ between them are known. If you now form two arithmetic ...
69 views

### Why no median-CVaR optimization for portfolios?

Question Since CVaR is a concept that can be applied to all probability distribution, even if they do not follow normal distribution, I thought CVaR should be more concerned with median, not the ...
47 views

### Constructing Portfolio Beta

Suppose I have a portfolio with securities with different history. Say some securities have 15-20 years of history and some are like Uber or Lyft, which has limited history. There are assets with 1/2/...
205 views

### Leverage constraints

I am trying to complete my project on Mean-Variance Leverage Optimization, and I have found lots of helpful advice on this forum. I wanted to ask you if you have some idea on how to implement a ...
84 views

I downloaded adjusted closing price using quantmod for a set of securities. I want to calculate daily/weekly/monthly return for all securities. Usual dailyReturn, weeklyReturn etc not working. What do ...
38 views

### Why can't I take the Value at Risk “VaR” as a a risk objective in PerformanceAnalytics? (it does work for "ES)

I am currently playing around with PortfolioAnalytics package in R and some data and I am aiming to create different portfolios with different VaR. However, I am struggling first of all, add.objective(...
111 views

### Portfolio volatility - Real life application

Given that a portfolio consists of Stock=USD 30, High-yield bonds(duration=5 years,spread duration=5 years) =USD 40 , Commodity = USD 30.
93 views

### Vega for long long-term ATM call and short short-term ATM call

You are long a long-term ATM call and short a short-term ATM call. The ratio is adjusted to make the total vega zero. If before expiry of the short-term option, spot is again at the strike price. ...
123 views

### Applying portfolio variance weight based on logarithmic returns?

The expected logarithmic return of a portfolio is calculated as : $$𝐸_p = \log\left(\sum_i w_i e^{R_i}\right)$$ Therefore, I was wondering that how can I apply weight to use with the variance based ...
79 views

### Classifying groups of stocks beyond Market Cap/Industry/Sector

I'm monitoring margin values for a portfolio and I want to classify the stocks in my universe using different metrics/information. Just for the sake of making analysis/inferences on the data I have. ...
38 views

### Which performance evaluation measure to assess “Connectedness Matrix” based porfolios?

1. Question Which performance evaluation measure would be best to assess the portfolios built on 'connectedness matrix'? The connectedness matrix is the concept introduced in the academic paper "...
319 views

### portfolio information ratio calculation on daily returns including hedged strategy results interpretation

I am tasked with calculating the portfolio information ratio on ~15 years of daily portfolio returns and I am finding several approaches online which is quite confusing. The first approach simply ...
140 views

### Arbitrage when risk-free portfolio earns less than riskless portfolio

I'm currently reading Paul Wilmott's excellent book on option pricing. Near the beginning, he constructs a risk-free portfolio using an option, and a short on the underlying to hedge the risk. I'm ...
821 views

### Some definitions in the BARRA Predicted Beta model

I'm studying the BARRA Predicted Beta model, and the common factor covariance between portfolio $p$ and the return on the market $m$ is defined as the product of the transposed vector of the factor ...
108 views

### Another variation of the 'Sharpe ratio' in CVaR-based portfolio optimization?

Question What is the ratio S(p) shown below? Do we have a name for it like 'Sharpe ratio'? The ratio above is introduced in the academic paper Optimal portfolio selection in a Value-at-Risk framework ...
543 views

### Portfolio Delta - long call, long put and short call

First and foremost, I'm trying to understand why you would construct a portfolio made up of long calls, long puts and short calls. I find this really abstract and confusing. I've tried drawing the pay-...
97 views

### Co-variance of Portfolio A with Portfolio B

I'm trying to calculate the correlation between two separate portfolios. I've used A*COV(AB)*B to calculate the co-variance of each portfolio where: A = Array ...
120 views

### Holding Period Return abnormally high

I've been doing my Dissertation and I was told to create a value - weighted portfolio on the 1979's 200 largest cap corporations (based on Market Value). I was also told that the correct way to build ...
61 views

### When does funding cost of a portfolio enter into the portfolio's present value?

This question comes from some confusion when reading Hull's book and from the general concept of no-arbitrage/self-financing portfolios in stochastic finance books. I am not fully seeing the ...
54 views

### Equal Weight better sharpe than Tangency portfolio

Could you explain to me what it means to have better Sharpe Ratio in Equal Weight portfolio than tangency portfolio (max sharpe). Thank you.
260 views

### Fama Macbeth regression and portfolio sort result contradiction

I ran Fama Macbeth (regression) on two variables called return and lag MAX ( monthly average return and lag of maximum return over a month). the results are like the following : ...
2k views

### How modern portfolio theory(MPT) and CAPM are related?

1. Question In what sense Capital Asset Pricing Model(CAPM) is related with Modern Portfolio Theory(MPT)? Why do we need to check whether the current price of assets is overvalued or undervalued ...
48 views

### Resource to learn about Long / Short Commodities portfolio

As title says, I'm looking to learn more about Commodities trading and how to report and monitor a Long short Portfolio. Can anyone point me to a good book / website where I can improve my knowledge? ...
3k views

### Portfolio Weight Sum and Negative Weights

I'm calculating the weights of 10 securities in a portfolio for a course project, with the objective of maximizing the sharpe ratio. I'm getting both positive and negative results for weights. The ...
38 views

### Differences Between Portfolio Daily Average Returns

I have a doubt about the average daily return for a 2 stock porfolio. I have the data of both stock returns over a 1511 day period. I used 2 approachs to calculate the average return. In the first one,...