Questions tagged [portfolio]

A portfolio is a collection of financial instruments. We often collect instruments together to represent the complete holdings of an investor and to analyze the overall risk (which may be lower due to diversification, i.e the portfolio holding multiple instruments).

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408 views

Where can I find the European equivalents ETFs from a USD superdiversified 10 ETFs portfolio

I have been using this superdiversified 10 ETFs portfolio. To lower the risk it's composed from stocks and bonds across the globe and includes some commodities. Being in USD currency and the Euro ...
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1answer
132 views

What does an optimized portfolio really tell us?

I am very new to this field, and have very recently started doing some self study on this topic. After reading some papers and reproducing some of the results in them, I am not very clear about what ...
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3answers
1k views

Calculating Portfolio Returns Across Sectors

I have a table of asset (mutual fund) returns and the percentage that each asset is in a particular stock sector: ...
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1answer
72 views

efficient portfolio with given risk

Is there a formula to derive an efficient portfolio to maximise the return, x'mu, for a given risk, x'S x (where x are the portfolio coefficients, mu is the mean return for each asset and S is the var-...
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2answers
2k views

Portfolio Management in R

I’ve been looking around for a R-package that will allow me to track my stock portfolio - basically I would like to enter stocks that I own, track the trades I make, calculate my open position & ...
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2answers
525 views

Portfolio Return Contribution by Sectors

I have a table containing the following fields: Date, PortfolioReturn, CashReturn, Sector1Return,...,Sector10Returns 'PortfolioReturn' is the sum of CashReturn + return contributed from 10 market ...
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1answer
303 views

How to deal with missing returns when creating value (equal) weighted returns

recently I am doing cross sectional regressions, and getting confused about missing returns. Suppose we have 100 stocks, then we want to construct a value weighted return (or equal weighted return). ...
2
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1answer
578 views

out-of-sample variance using rolling window

I am currently working on the comparison of the constructed portfolios using out-of-sample variance criteria. I am going to use rolling window procedure for the comparison. First, I choose a window ...
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1answer
789 views

Predicting stock returns - in a panel data specification or by using portfolio formation strategies?

I'm working on an empirical analysis where I try to predict stock returns using weekly data. Ideally, I would like to use a panel data model like the following: $$ Y_{it}=X_{it}'\beta+\varepsilon_{it}...
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1answer
54 views

structural model - exposure estimation

The following example is from the book Active Portfolio Management by Grinold and Kahn. Suppose we have the factor returns and want to estimate the exposures/factor loadings. Say the factor returns ...
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1answer
61 views

Optimal Portfolio Formulation

I'm currently studying Luenberg's Article "Projection Pricing" (Jrl of Optimization Theory and Applications, Vol. 109, No. 1, pp. 1–25, April 2001) and there is a claim that I can't prove. ...
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85 views

Assumptions of the CAPM

As to my understanding, the CAPM assumes that all investors behave as described in the portfolio theory. Consequently, all investors hold a combination of the risk-free investment and the efficient ...
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2answers
573 views

Volatility and weights of a portfolio whose value is negative

How do you calculate the one day standard deviation (in dollars) for a portfolio that is short $30,000? How do you calculate the weightings to use? I already have the necessary covariance matrix.
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254 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 ...
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1answer
175 views

How to construct a risk parity Portfolio by fixing the portfolio volatility on a desired level?

I would like to get the weights of a risk parity portfolio (equal risk contribution). Therefore I use following formulas: $\sigma(w)=\sqrt{w' \Sigma w}$ $\sigma_i(w)= w_i \times \partial_{w_i} \...
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1answer
236 views

Portfolio optimization in R with factor tilting while constraining volatility

what optimizer I can use in R to solve the following portfolio optimization problem: $min(f^Tx)$ st: 1. $ -a \le \sum_{i=1} ^{n} x(i) \le b$ 2. $ -c \le x(i) \le d$ 3. $ e \le \sum _{i=1} ^n |x(i)...
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1answer
880 views

VAR of portfolio containing options, equities and forwards

If we want to calculate VAR of a portfolio using variance covariance matrix (delta normal method), containing equities, forwards and options, how do we treat each asset class for making the variance ...
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3answers
717 views

What's the disadvantage of using linear programming for portfolio optimization?

I am a MFE student and we have project on the Markowitz portfolio optimization problem. i am wondering how much impact there will be, if I use a simpler linear optimizater instead of a quadratic one. ...
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2answers
82 views

Leverage on ETF the same effect as on portfolio?

While we know that leveraged ETFs do decline in value to zero given infinity, can we also say the same with our portfolio value if we use leverage in our trading activity and seeing our portfolio ...
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1answer
468 views

How do I show that there is no tangency portfolio?

Question: Suppose that the risk-free return is equal to the expected return of the global minimum variance portfolio. Show that there is no tangency portfolio. A hint for the question states: Show ...
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1answer
134 views

Is the volatility of a trader's wealth equal to the volatility of the underlying assets traded?

Assume that a trader trades in several stocks with different volatilities. The return of the trader's portfolio would be the weighted average of returns and the risk would be a function of the the ...
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3answers
320 views

Greeks of self-financing portfolio

I would like to learn more about the Greeks of portfolios of options: In textbooks and websites, I commonly encounter the unqualified claim that "The Greek measure of a portfolio is the sum of the ...
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1answer
2k views

Using alpha to evaluate trading strategy

I have a trading strategy that generates returns $R_{t}$. I want to test the strategy by looking at the alpha: $R_t - R_{f,t} = \alpha + \beta (R_{m,t} - R_{f,t}) + e_t$ I compare my alpha against ...
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113 views

Introduction to volatility targeting, scaling, timing

I am a finance student, but I am quite new to the field of asset management and quantitative Finance. I have to write a literature review about volatility targeting and I am looking for good resources ...
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28 views

Black-Litterman Weights for Intersecting Asset Classes

I'm trying to implement Black-Litterman for an arbitrary selection of assets some of which might be subsets or intersect with others. For example, one portfolio might be US Equities (VTI) A global ...
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69 views

Arbitrage portfolio example

Can you give me a concrete example of a self financing portfolio which gives arbitrage opportunity in the two-dimensional Black-Scholes model? By the two-dimensional Black-Scholes model I mean $$dS_{1}...
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74 views

Finding a PDE for an option $V(t,r(t),S(t))$

I have 2 approaches in my mind for finding a pde of an option that depends both on the short rate as well as the stock price- $V(t,r(t),S(t)$. Are these equivalent? Find a hedging portfolio by ...
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274 views

How to calculate Turnover Ratio of a scaled Portfolio

I want to calculate the Turnover of my scaled Momentumportfolio (Barroso und Santa-Clara 2015) They described Turnover Ratio with the following formula: While i understand the general concept (...
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155 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. ...
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40 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 "...
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1answer
607 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 ...
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61 views

How to ascertain/establish certainty of a portfolio rebalancing strategy?

I created a portfolio rebalancing strategy, that I am currently paper trading with. It is, primarily, based on mean-reversion principle with a few rules in place, and geared towards cryptocurrencies, ...
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83 views

Portfolio of single stock short put options: which correlation structure preferrable?

Let's say you want to have a equally-weighted (in terms of the option price) portfolio of short put options on various stocks with the same maturity. Running Monte-Carlo simulations, it seems that ...
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350 views

Minimum Variance Portfolio problem [closed]

Minimum Variance Portfolio Suppose there are N stocks in the investmentable universe and we have a fully invested portfolio investing 100% of the capital. The Covariance matrix is denoted as ∑. We ...
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198 views

Liquidity Adjusted Asset Pricing Model

I have a data set with 4000 companies and I have calculated a liquidity measure of each of the company in the dataset as Where, Turnover is the monthly average ratio of daily volume to shares ...
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0answers
256 views

Behaviour of out of sample efficient frontier

I am comparing the efficient frontier of a set of portfolios that are in and out of sample. The first period is from 1991-01-03 until 1992-10-03 and the second one from 1992-10-03 until 1994-03-03. I ...
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44 views

Budget Constraint in Duffie's book

On Page 5 of Duffie's Dynamic Asset Pricing Theory, the budget-feasible set is defined as: $$X(q,e) = {e+D^T\theta \in R_+^s:\theta \in R^N, q\theta \leq 0}$$ Compared to Kerry Back's presentation of ...
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70 views

Portfolio optimised for diversification and regular yield. How to hedge?

Here is a portfolio optimisation for equity dividend and yield designed to diversify holdings and produce regular monthly returns using only ETFs complete with R code. http://prescientmuse.blogspot....
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186 views

Sharpe Ratio for loans

I am trying to calculate the sharpe ratio for a set of loans. These loans have already matured and I know if they were good or not: grades are the different grades of the loans. interest rate is the ...
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289 views

What happened to Mountain View Analytics?

I stumbled over Thomas Cover's work on algorithmic portfolio selection; apparently, an outfit called "Mountain View Analytics" attempted to implement the suggestions from Cover's research. ...
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1answer
271 views

Why does my posterior mean differs from Idzorek's results?

I have implemented two different expressions (Idzorek p.6, Walters p.51) of a posterior mean return calculation within a Black-Litterman framework. My results are the same, irrespective of the ...
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0answers
157 views

Portfolio insurance with a coherent risk measure (CVaR)

I would like to analysis of portfolio insurance under a coherent risk-measure method (CVaR), How can I achieve that? Is there a way to turn the problem into a linear programming problem? or to ...
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0answers
136 views

Calculating stock weight for SEC13F filers

I am trying to evaluate weight of stocks in portfolio for an investor. For this purpose I use SEC13F filings for particular quarters and historical prices from Yahoo. There are stocks in portfolio ...
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3answers
698 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: ...
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2answers
238 views

Portfolio Optimization - Equal Weighting Algorithm

I am trying to write an algorithm which can output the number of stocks to purchase so that it equal weights positions in a portfolio of stocks. Say we want to invest $1000 in 5 stocks with equal ...
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1answer
148 views

What does risk tolerance represent for utility-maximizing optimization with linear constraints?

Referencing Wei Jiao (2003) p. 8, formula (1.12), for $Ax = b$ set of linear constraints in a portfolio, the solution for the optimum weights to maximize the utility is: $$w^* = \Sigma^{-1}A^T \left( ...
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1answer
89 views

What is `1+ return` called? [closed]

Assuming day 1 my wealth is 1. At day 2 I earned 20%. So the rate of return is 0.2 and the wealth at day 2 is 1.2. At day 3 I earned 50 % again. So the wealth at day 3 is 1.8. I wonder what is the ...
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1answer
208 views

How to compute portfolio returns when constructing a dollar-neutral portfolio

I am trying to wrap my head around this statement: dollar-neutral portfolios are built: dollar amounts of both long and short positions are equal. Furthermore, it is also true at the stock level: ...
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3answers
156 views

Why is Portfolio Theory not using the distribution of portfolio returns

Portfolio Theory uses things like Expected Value, Risk, Confidence. I wonder why it's not ...
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1answer
113 views

Adjusting volatility while constructing portfolio

I am trying to construct a portfolio based on a macro momentum strategy for backtesting purposes as outlined in https://www.aqr.com/-/media/AQR/Documents/Insights/White-Papers/A-Half-Century-of-Macro-...

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