# Questions tagged [return]

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### How to calculate daily returns when the cumulative PnL can become negative?

I would like to know a way to compute returns when the total PnL of a strategy can become negative. For example: Total PnL day 1: 100 Total PnL on day 2: -20 Total PnL on day 3: 30 I have that kind of ...
1 vote
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1 vote
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### 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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1 vote
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### 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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750 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 ...
314 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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1 vote
54 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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84 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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160 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{...
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 ...
191 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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729 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
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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1k 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
38 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
319 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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1 vote
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### 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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