Questions tagged [return]
The return tag has no usage guidance.
49
questions
1
vote
0answers
16 views
Cumulative return calculation with monthly return
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 ...
0
votes
1answer
32 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 ...
0
votes
0answers
23 views
Formula for bond after-tax total return?
I'm interested in calculating the after tax total return on a fixed coupon bond. In Fabozzi's "Fixed Income Mathematics", 4th ed, p. 149, a formula for "after-tax coupon income interest on interest" ...
6
votes
2answers
97 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
221 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
135 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
47 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
76 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
23 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
62 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
42 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
38 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
379 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
44 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
64 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
85 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
811 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
434 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
48 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
1k 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
39 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
77 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
134 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
1k 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
156 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
328 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
624 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
235 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
90 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
477 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
136 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
2k 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
1k 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
251 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
114 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
215 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
476 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 ...
3
votes
2answers
3k views
Calculating Geometric mean
I need to annualize daily returns for about 120 firms for over a period of 10 years. I chose to calculate the geometric return because 1) it is the actual return 2) to avoid the asymmetric effect of ...
8
votes
2answers
15k views
Square root of time
I am writing about VaR and I am wondering about the following:
We can scale the VaR to different time horizons by using the square root of time, which means, that the volatility is adjusted by square ...
2
votes
3answers
969 views
Logarithmic returns for realized variance?
I am wondering which method makes more sense when computing log returns. I am trying to compute log returns for realized variance, and I have the opening and closing prices for every minute.
Since ...
1
vote
1answer
300 views
Regression giving the return on a stock
I have this regression equation:
$$
R_{stock} = 3,28\% + 1,65*R_{market}
$$
Where $R_{stock}$ is the expected return on a stock and $R_{market}$ being the market risk premium.
I have a one-year T-...
4
votes
2answers
27k views
How to calculate equally weighted market portfolio
There's two studies that test the same thing in different markets (i.e. they apply the identical methodology). They state:
1) "$R_{mt}$ is the equally weighted average stock return in the dual-listed ...
13
votes
1answer
489 views
Is Arithmetic Return Bias Basis of Low Vol Anomaly?
An observation in capital markets is that the connection between return and risk (measured as volatility) is not that straightforward (at least not as modern portfolio theory assumes). One interesting ...
9
votes
2answers
409 views
local price return and volume relationship
I wanted to see how the stock price and volume relationship is locally.
So I tried ranking both the daily return (at day t) and volume (at day t) base on a 30 day rolling window with historical daily ...
4
votes
1answer
2k views
Valuing Total Return Swaps
In my quest for simulated data, I am trying to generate prices for Total Return Swaps by calculating the NPVs of the fixed and floating leg. My problem: Given the fixed leg, how do I set the spread on ...
14
votes
3answers
6k views
Total Return measurement paradox w/ Adjusted Close Prices
Using total return calculations is critical in developing security selection models.
The standard way to measure total return is to develop a series of price-adjusted data. Investopedia describes the ...
