Questions tagged [ratio]
Financial ratio analysis
37 questions
19
votes
4
answers
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Sharpe ratio and leverage
Does leverage affect the Sharpe ratio? If my Sharpe is 2 at no leverage, does it change, fall by half say, at a different leverage?
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8
votes
1
answer
441
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Why is it wrong to rank stocks by P/E ratio, sell the top quartile, and buy the bottom quartile?
I am reading Advances in Financial Machine Learning by Marcos López de Prado. In chapter 11 The Dangers of Backtesting, exercise 11.5 asks:
We download P/E ratios from Bloomberg, rank stocks every ...
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6
votes
4
answers
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Credit Rating or Probability of Default from Financial Ratios
Does anyone know of any papers about credit rating development or probability of default estimation done based on financial ratios that also include methodology and maybe good/bad criteria?
Something ...
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3
votes
1
answer
822
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How do i test the significance of Sharpe ratio of a strategy using bootstrap
How do i test the significance of Sharpe ratio of a strategy whether it is any different from another strategy ?? How do i get a p-value out of it ?
What should be the H0 in the hypothesis testing ?
...
- 93
3
votes
1
answer
480
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Should I use common equity or total equity for book value? (when replicating Lewellen's 2015 paper on a cross section of expected stock returns)
I'd hereby would like to ask if any of you know whether I should use common equity or the total equity value, when computing monthly BM ratio's as done by Lewellen is his 2015 paper on a cross section ...
- 165
3
votes
1
answer
1k
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Comparing the return of different roll strategies
I am interested in calculating the effect of the roll return using different roll strategies. In specific I want to mimic a long-only futures investments. I have historical data for several ...
user15050
2
votes
2
answers
1k
views
Historic Value at Risk - Ratios vs. Differences
Quick Summary on Historic VaR
Let $S_0,...,S_n$ be the daily values of some stock (where $S_0$ is the current value). Then for $i=1,\ldots,n$ we let
$$\hat r_i:=S_{i-1}/S_i \quad \text{and}\quad \hat ...
- 1,052
2
votes
2
answers
308
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Downside Market Capture Ratio: compute with sum or product?
I'm computing downside market capture ratio in R. The PerformanceAnalytics R package has a built-in UpDownRatios function which does this, but it computes the ratio using sums of returns, not ...
- 274
2
votes
1
answer
609
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Dupont analysis of banks
I've been analyzing banks balance sheet. However, I am getting confused regarding definition of ratios. For instance, some authors state
Net Profit Margin = (Net profit)/Net interest income others as
...
- 221
2
votes
1
answer
2k
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Variance Ratio Test in R
I would like to conduct a variance ratio test for a financial time series in order to examine whether I can apply the square root rule for the variance with the software R.
I used the Automatic ...
- 177
2
votes
1
answer
600
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Did I correctly calculate all the elements of the Sortino ratio?
I wish to verify my understanding and correctness of my methodology with this question, when calculating the sortino ratio for the SP500. My base data is the total returns SP500 index from Yahoo ...
- 257
2
votes
1
answer
258
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Square Information Ratio
I have read the following sentence : " The information ratio measures the active management opportunities, and the square of the information ratio indicates our ability to add value " ( In the Grinold'...
- 526
2
votes
3
answers
411
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About the number of independent forecasts in the Fundamental Law of Active Management
The original FLAM predicts the information ratio by
$$
IR = IC \times \sqrt{N}
$$
where $IR$ is the Information Ratio, $IC$ is the information Coefficient and $N$ is the number of independent ...
- 123
2
votes
0
answers
290
views
Annualised Sharpe Ratio of a 24/7 Round-The-Clock High Frequency Trading Strategy
Consider a high frequency trading strategy that trades Bitcoin-USD round the clock 365 days of the year at 5-minute intervals. How would one calculate the annualised Sharpe ratio of such a trading ...
- 21
2
votes
0
answers
63
views
negative correlation between EBIT and sales in Altman's Z
In his 1968 paper, Altman found that sales volume (i.e., sales divided by total assets) is a useful predictor not by itself, but as a suppressor variable to improve the predictive power of EBIT/TA.
...
- 21
1
vote
1
answer
139
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Sharpe Ratio with Stochastic Interest Rate?
All versions of the Sharpe ratio that I've seen seem to assume that the risk-free rate is constant, and the standard deviation of the excess return in the denominator simplifies to the standard ...
- 31
1
vote
1
answer
55
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Scaling variables (Fraction vs % vs log) when regressing twelve month returns
Dear Stack community,
My question is the following;
If my dependent variable is twelve month returns.
And as independent variables I have fiscal year variables like ROA and log variables like the log ...
- 165
1
vote
1
answer
197
views
Test significance for information ratio
Suppose that we have an estimated Information Ratio $IR^*$ calculated from the relative returns between a portfolio and a benchmark.
I am looking for a way to quantify the uncertainty of this ...
- 11
1
vote
1
answer
433
views
Calculate PE ratio of equal-weighted index
I need to calculate Price-to-Earnings Ratio (PE Ratio) of an Equal-weighted index.
...
- 111
1
vote
1
answer
644
views
Conversion factor for futures hedging?
I had a question regarding conversion factors and treasury futures in the context of hedging for DV01.
In my textbook, in order to calculate the hedge ratio they give this formula:
$$
HedgeRatio= \...
- 11
1
vote
1
answer
139
views
How to calculate R for strategies with dynamic exit points
Calculating risk-reward ratio R is easy when trading a straight forward strategy which has its entry and exit points clear:
...
1
vote
1
answer
189
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How do I automatically graph S&P PE ratio moving average VS DOW
Obviously this is a rookie question, I'm simply looking to plot the S&P PE ratio moving averages over different periods of time and plot them vs the DOW. Ideally I would love like something that ...
- 111
1
vote
1
answer
756
views
What is type of Operating income to total assets ratio? [closed]
What is type of Operating income to total assets ratio? Leverage, Profitability, Asset composition or Liquidity? and why?
- 286
1
vote
1
answer
160
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Calculating Ex Post Sharp Ratio's for decile portfolios
Dear Stack community,
I hereby would like to ask what the correct calculation is for calculating Ex Post Sharp Ratio's. If I am correct, I already know that I am supposed to divide the average excess ...
- 165
1
vote
0
answers
43
views
From SEC Comprehensive Data Set to Clean Balance Sheets/Income Statements
I am looking for advice on how to smartly get from unstructured financial data to a clean summary of balance sheets. I think of this not as a coding problem but of a question how to approach the task -...
- 11
0
votes
1
answer
1k
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P/E Ratio of a stock index
I tried to find the P/E ratio of a stock index. Should I calculate the weighted harmonic mean of all constituents OR select the weighted median P/E ratio as the index's P/E?
many thanks!
- 115
0
votes
2
answers
142
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0
votes
1
answer
66
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Maximze Sharpe ratio from matlab to python [closed]
I know there matlab library funtion for
Optimzing Sharpe ratio
estimateMaxSharpeRatio, it mentioned it use direct method
How can i do the same thing in python
Is there any python libraries
Or need ...
- 1
0
votes
1
answer
111
views
How sector PB ratio is calculated on ticker tape?
I know what PB ratio is and I am looking forward to calculate the sector PB ratio.
Here's the sector PB ratio of State Bank of India is 2.23. Link
The names of companies and its corresponding details ...
0
votes
1
answer
100
views
Calculation of Information Ratio
When calculating an information ratio, should the average of monthly returns be used or the cumulative monthly returns be used?
Thanks!
0
votes
1
answer
261
views
How can I get all the financial ratios of all the companies listed on Nasdaq?
I hope the question is clear enough.
I know of intrinio.com, which lets you get each datapoint at a time, but not all at once.
- 153
0
votes
2
answers
595
views
dollar neutral ratio vs beta hedged ratio
Hi guys i really hope you can help as i've been pulling out my hair for days on this!!
OK so basically i understand the dollar neutral ratio, simply stocka/stockb = dollar neutral ratio. Works great ...
- 1
0
votes
0
answers
77
views
Does the interval of a portfolio's returns affect Sharpe and Sortino? If so, what's the gold-standard interval?
I'm currently creating a backtesting script and I've got to the point of calculating risk metrics.
It seems like the interval (daily, weekly, or monthly) I use for returns heavily changes the ...
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0
votes
0
answers
162
views
Sharpe Ratio and interest rate
The Sharpe ratio is calculated as the ratio between the return and the volatility.
Now, when I have a trading strategy that requires to be invested sometimes and to be flat other times, I assume 0% ...
- 21
0
votes
0
answers
46
views
Distribution of the Information Ratio // Mean and Variance Product
We are investigating the distribtuion of the information ratio. However, instead of using the original information ratio defined as
\begin{equation}
IR=\frac{E(r_1)-E(r_2)}{\sqrt{Var(r_1-r_2)}},
\end{...
- 21
-1
votes
1
answer
372
views
Calculating the Risk Free Rate [closed]
I have an assignment and I have to calculate the risk-free rate with the following data:
Stock A: E(R) = 10% ; Standard Deviation = 5%.
Stock B: E(R) = 20% ; Standard Deviation = 10%.
I also ...
-3
votes
1
answer
173
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sharpe ratio, convert into convex function, not understand that constraint, [duplicate]
I am reading about tranforming sharpe ratio into convex problem
After some following, its converted into min xTxy s.t. (u-rf e)x = 1
...
- 1