Questions tagged [return]

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Predicting returns from historical data

Let's assume I have a matrix $R$ $(m$x$n)$ where I have the returns for $n$ stocks on $m$ consecutive days $d_1$, ..., $d_m$. I want to be able to build a predictive model for $d_{m+1}$. How could I ...
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1answer
49 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 ...
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64 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 $$ ...
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1answer
52 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 ...
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2answers
69 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 ...
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1answer
37 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) ...
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57 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 <...
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1answer
99 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 ...
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0answers
25 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" ...
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2answers
128 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 ...
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2answers
239 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_{...
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2answers
170 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 ...
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50 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 ...
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1answer
89 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 ...
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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 ...
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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{\...
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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 ...
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1answer
39 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 ...
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2answers
481 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 ...
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0answers
49 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 ...
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1answer
74 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 ...
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1answer
92 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 ...
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1answer
981 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 ...
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1answer
507 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 ...
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1answer
49 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 ...
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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 ...
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41 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 ...
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78 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 ...
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1answer
136 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{...
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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 ...
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1answer
161 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 ...
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2answers
432 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 ...
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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 ...
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2answers
688 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 ...
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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 ...
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259 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 ...
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1answer
91 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 ...
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483 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}-...
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1answer
143 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. ...
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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 ...
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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 ...
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2answers
276 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 ...
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1answer
115 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 ...
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1answer
227 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 ...
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1answer
505 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 ...
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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 ...
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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 ...
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2answers
16k 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 ...
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3answers
1k 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 ...
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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-...