Questions tagged [return]
The return tag has no usage guidance.
59
questions
-4
votes
0answers
26 views
Do you annualize returns before computing Treynor ratio?
There is a lot of information out there on how to arrive at Sharpe ratio, but less on how to arrive at Treynor ratio.
Assuming we have quarterly returns, would we first annualize each quarterly return ...
0
votes
1answer
88 views
What is a cumulative return series?
I guess this is pretty easy but I cannot find a definition anywhere. I am trying to reproduce a paper and they say they use a cumulative return series at some point. Does anyone know exactly what this ...
1
vote
2answers
151 views
best way to calculate the return
Suppose that you want to calculate the single period return. Let p0 be the initial price and p1 be the final price over the ...
0
votes
0answers
72 views
R studio yearly return from monthly stock file
I have merged Compustat and CRSP but I have been stuck on this issue for a long time.
I wanted to create the variables:
RET ="contemporaneous annual stock returns calculating using CRSP monthly ...
0
votes
0answers
131 views
How is the total return of an alpha strategy being calculated during backtesting?
I am using a quant simulation platform and I have chosen a formulaic alpha to be used. Now the platform is backtesting and displaying the total return of the alpha strategy over 12 years. The trading ...
0
votes
1answer
137 views
Difference between returns
I have a monthly time series of monthly returns for a specific factor that I'm investigating, the Quality factor QMJ as proposed by Asness et al. (https://www.aqr.com/Insights/Datasets/Quality-Minus-...
1
vote
1answer
59 views
How to adjust a portfolio's rate of return for contributions and withdrawals?
Suppose we have a portfolio with many assets.
Since this portfolio receives monthly contributions and withdrawals, what is the best method to evaluate its global rate of return and avoid computing ...
0
votes
0answers
563 views
Beta Adjusted Return
I'm a bit confused about the definition of the 'Beta Adjusted Return', say I have benchmark whose return is $r$ and a stock whose return is $R$, the beta adjusted return is defined as
$$ ...
1
vote
1answer
67 views
How to calculate IRR between 2 numbers
I want to consider 4 scenarios in google sheets. All deal with a periodic return over n periods
Positive to Positive
Positive to Negative
Negative to Negative
...
0
votes
2answers
94 views
How can I calculate returns for three investment strategy?
Assume that the price of DF stock went from a price of $104 on March 2 to 146 on April 1.
With a current stock price of 146, there is a call option available on the DF stock with an exercise price ...
0
votes
1answer
42 views
Calculate 6 month- return for an investment [closed]
Assume that the price of DF stock went from a price of $104 on March 2 to 146 on April 1.
With a current stock price of 146,
Invest all of your amount 14,600 in the DF stock (buy 100 shares)
...
1
vote
0answers
426 views
Cumulative return calculation with monthly return [closed]
I am working on calculate the cumulative return and I have monthly return rate as input. So I found formula of cumulative return:
$$
\text{cumulative} = (1 + r_1) (1 + r_2)(1 + r_3) - 1
$$
so I used <...
0
votes
1answer
482 views
Long Short excess returns?
When calculating the long-short excess returns for a portfolio. Do I have to first calculate the excess returns of the long and short leg and then add them together or first calculate the average long ...
6
votes
2answers
222 views
CDS volatility: daily return calculated by simple substraction (Pt - Pt-1)?
I am working on validating the CDS volatility generated by a third party risk engine. It appears that returns are calculated with simple substractions and adjusted for the CS01:
(Price of the CDS ...
5
votes
2answers
308 views
Currency Hedged Excess Return
In the famous article "Global portfolio optimisation" of Black and Litterman, the authors defined the excess return on currency-hedged assets as the following :
$$
E_t = 100 \frac{P_{t+1}X_t}{P_tX_{...
1
vote
2answers
305 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 ...
0
votes
0answers
52 views
What 10 year bond data to use when making a risk/return scatter plot?
I am making a risk/return scatter plot (seen below) (from this site):
What data must be used for bonds (e.g. 3 month or 10 year US bonds)? I thought you would use this data, but if you take the years ...
0
votes
1answer
145 views
Calculate return for a set of securities downloaded using quantmod
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 ...
1
vote
0answers
24 views
Source for derivation of acquisition price for given IRR and cash flows
Does anyone know a quotable source - book/academic or practitioner's paper - that derives the acquisiton price for a target firm when the buyer's desired IRR and all cash flows over time of the target ...
1
vote
1answer
64 views
Which are the practical implications that the continuously compounded rate of return can be smaller than the expected rate of return?
I'm reading Hull's Options, Futures and other Derivatives and it intrigues me that the distribution of the continuously compounded rate of return x is: $x \sim \phi(\mu - \frac{\sigma^2}{2}, \frac{\...
0
votes
1answer
46 views
Return on Investment for rolled options position on margin [duplicate]
I'm trying to calculate my return on investment (ROI) for an options position on margin that has been rolled. I'll give an example:
Sell to Open (STO) a naked put position, for which I collect 100 ...
0
votes
1answer
42 views
Most Recent Stock Return for a Machine Learning Project [duplicate]
I am doing a machine learning pet project that requires me to construct a column for stock return between Jan 1, 2018 and today (Dec 26, 2018). I am basically looking for the most recent annual return ...
3
votes
2answers
676 views
Transform Fama French Returns to Euro
I constructed a global portfolio and calculate it's daily return in Euro.
Now i want to do the regression with the Fama-French daily factor-returns (HML, SMB). However, these returns can only be ...
2
votes
0answers
59 views
Bond Index Return from Yield Curve Data [duplicate]
I am trying to compare fund returns with benchmark returns. I have some yield curve data (some of them calculated by Bloomberg) but not bond price or return data. Is there any way to get bond returns ...
-2
votes
1answer
103 views
Private Equity Fund Return (IRR)
Can anyone guide me that how to calculate IRR for Private Equity Fund. I have the following data.
Capital Call with dates
Management Fees with dates
I used excel formula of XIRR, but I found that ...
1
vote
1answer
105 views
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 ...
0
votes
1answer
1k views
Javascript calculating IRR using Newton method
I leveraged the github code (https://gist.github.com/ghalimi/4591338) to compute IRR using Newton method. When I replicated the codes step by step in excel, I'm able to find the optimized resultRate ...
4
votes
1answer
673 views
Discrepancy between total shareholder return and return calculated using adjusted share price?
I'm trying to understand a difference I'm seeing between the return I calculate using adjusted close price and the total shareholder return with dividends reinvested (TSR) I get from Bloomberg / this ...
0
votes
1answer
51 views
Is my data fittet to be significant?
I am new to this forum and hope for some help. I have a dataset of returns. I cannot tell where these come from, but let's assume they come from a trading algorithm of stock prices. The returns are ...
1
vote
1answer
2k views
variance of log return
Suppose $C_i$ is i-day's closed price, when drift is small,
we have the close to close variance
$$\sigma^2 =\dfrac{1}{n}\sum\limits^n_{i = 1}\left(\log\left(\dfrac{C_i}{C_{i-1}}\right)\right)^2.$$
If ...
1
vote
0answers
42 views
normalized 15-min absolute returns
I was reading an article today and I came across a new expression: "normalized 15-min absolute returns". I know what returns mean but I don't have any idea how I can normalize them ( I am not sure if ...
0
votes
0answers
83 views
Return on asset value for one company different on Yahoo Finance and on Market watch
I am wondering why the return on asset (ROA) is so much different for a company when reported on Yahoo finance and Market watch website.
Here is Yahoo finance link: Yahoo Finance
and here is ...
0
votes
1answer
148 views
What is the distribution of percentage return in general?
In finance, we often assume that the log-returns $\ln(1+R(t))$ follow a normal distribution.
Since $\ln(1+R(t)) \approx R(t)$ when $R(t)$ is small,
\begin{equation*}
dS/S \sim \text{Normal}.
\end{...
0
votes
1answer
2k views
Orthogonal sources of risk and return
I am sorry for my incompetence. I am new in Quantitive Finance, so I read an article about the relationship between Alpha and Portfolio Risk and I can not understand what is the meaning behind the ...
2
votes
1answer
171 views
Risk, required return and expected volatility - what is the relationship?
Return required from risk averse agents from risky investments are proportional to expected return variance. That is from the textbook, you take the portfolio with the highest return to standard ...
0
votes
2answers
675 views
Interpretation of Excess Return
How is excess return defined for a given asset?
There are altogether two different definitions for excess return used in the calculation of alpha and beta and I'm unable to understand which one ...
1
vote
0answers
1k views
How to calculate monthly Return from a Momentum Strategy with overlapping Holdingperiods?
I replicate a Momentum Strategy from Rey and Schmid (2007) "Feasible momentum strategies" based on the idea from Jegadeesh and Titman (1993). I only buy the single stock with the highest past return ...
2
votes
2answers
955 views
Correlation: Use Price or Return? Return doesn't make sense [closed]
I am trying to find the correlation between the returns of two indices over a long period of time (10 years+) . Should I be using the index daily price level or the index daily total return? Most ...
1
vote
0answers
36 views
What is the expected rate of return from paying 1 today for a 50/50 bet receiving either 2 in year 1 or 0.5 in year 2? [closed]
What do you think is the correct way to calculate expected return for this example?
I think Method4 below is correct.
Method1 35.4% = AVERAGE(1.0, 0.5^(1/2)-1)
Incorrect, but some will argue that ...
1
vote
0answers
293 views
Generalized method of moments concept in CAPM testing
In the course of my master thesis I’ve come across a paper by Carr and Wu (2009) where the authors evaluate whether returns on variance swaps can be explained by the simple CAPM. (really only market ...
1
vote
1answer
97 views
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 ...
3
votes
0answers
543 views
Calculating Net Annualized Return on LendingClub historical data
I am interested in the formula LendingClub provides as their measure of "Net Annualized Return":
$\big(1 + \frac{\sum_{i=1}^N{((I_i + L_i - S_i - C_i + R_i) / P_i) P_i}}{\sum_{i=1}^N{P_i}}\big)^{12}-...
1
vote
1answer
184 views
Intrepreting the Capital Market Line plot
I am looking at plots of the Security Market (SML) line and Capital market line (CML).
The X axis is the beta for the SML and Standard deviation for CML; the y axis is labeled with excess return.
...
1
vote
2answers
3k views
convert three months interbank rate into monthly rate
I have a time series of the three month interbank rate each month and I suppose that the rate is has yearly frequency.
I need these interbank rates to be on a monthly basis because I want to us these ...
-1
votes
1answer
2k views
Calculate the total returns from the total return index [closed]
I have the Total Return Index(RI) for several companies.
I know that I can calculate the log retunrs with $ln(RI_t/RI_{t-1})$. Therefore my first guess would be to ...
2
votes
2answers
318 views
ITM Puts under negatively skewed return distribution (volatility skew)
I read Hull (2009) on implied volatilies. I understand that (given a negatively skewed return distribution) an OTM-Put is more worth than under a normal distribution and that a OTM-Call is worth less ...
0
votes
1answer
118 views
decoding this formula about nominal and real return [closed]
I am sorry if the following question is not quantitative finance.
I am reading this thing badly written lecture notes, which says
$W^r_1 \equiv W_1/P_1^g = (W_0^rP_0^g)(1+R)=/P_1^g$
$(1+R^r)\equiv ...
0
votes
1answer
236 views
Bond duration as estimation to holding return
I am really struggling to prove to myself that when we can estimate the one-year holding period return for a three-year zero by using the following estimation:
S3 - Duration2*(f1,3- S3)
Where Sn is ...
2
votes
1answer
575 views
Required Rate of Return vs Expected Return
I faced a problem that gives the following information:
market risk premium, and risk free rate is given
You currently have a portfolio of amount of x, beta b1.
Now there is a new investment ...
2
votes
0answers
118 views
What does it mean to adjust for short-run liquidity in finding risk-free rate of return
Risk-free rate of return should equal the expected long-run growth rate of the economy with an adjustment for short-run liquidity.
What is meant by the last phrase, "adjustment for short-run ...
