Questions tagged [returns]
The asset rate of returns is the profit on a particular investment; it includes any change in the asset value, interest, commission or dividends and so, all other cash-flows which an investors receive or pays due to the investment.
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Equity and Credit Portfolio Return
This might sound like a trivial question but would appreciate the answer.
How would you calculate the return of the portfolio consisting of only equity and credit instruments? For example, consider ...
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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 ...
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How to apply derived beta to daily change?
I've taken three months of price return data for two instruments and calculated a $\beta$ between the two using the formula $\beta = \frac{Cov(x,y}{Var(y)}$ with the goal of estimating what the ...
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Calculating Portfolios Covariance via Bilinearity with Log or Simple Returns
I'm wanting to calculate the covariance between two portfolios $A$ and $B$ which are allocated to assets $X_i$ (where $i \in \left[1, 2, \cdots, N \right]$) with weights $\vec{w_A}$ and $\vec{w_B}$, ...
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Estimating distribution of rate of return
Let $f[t]$ be the price of a stock at time $t$. We can calculate the rolling rate of return of the stock in a window of length $n$ by computing:
$$r[t] = \frac{f[t] - f[t-n]}{f[t-n]}$$
$r[t]$ is ...
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Compounding vs Annualizing Returns in a Portfolio Optimization Context
This might be a rather basic question that might be closed... but I can't for the life of me understand why in many Google search results the annualization of daily returns is done like this:
r_yearly ...
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How to calculate weighted return of two stock prices? [closed]
I have 2 list of returns
A = [0.00538467, 0.04701923, 0.00170811,...]
B = [0.00299271, -0.0060228 , -0.07761099,...]
I take long position in A and short in B.
How to calculate the total return and ...
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Contribution to compound returns
When trying to recreate this chart from Deutsche on contribution to compound returns of an asset class I'm using log returns of each percentile group (bottom, mid, top), take the sum and divide each ...
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Tricky question about returns [duplicate]
I have a list of monthly returns.
-10% -20% -70% -30% -15% -60%
The total end return is -94.859%. Because you calculate = 100 x (1+ -10%) x (1+ -20%) x ...
Now I ...
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Effect size for information coefficient
The information coefficient is the correlation between a signal $g(t)$ and returns $r(t)$. I’m hoping to build some practical intuition on the information coefficient.
Similar to the notion of effect ...
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covariance between squared returns and past returns
Let $y_t = \sqrt{h_t} \epsilon_t$ where $\epsilon_t\overset{ iid}{\sim} N(0,1)$
$h_t = \alpha_0 +\alpha_1 y_{t-1}^2+\beta_1 h_{t-1}$ with $\alpha_0>0, \alpha_1>0, \beta_1<1,\alpha_1+\beta_1&...
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Filtering a time series of returns by deleting some points
I have a time series of returns of an asset (call this $ X_t $) which I have verified to be stationary. Let's say I generate a new time series $Y_i$ which is a filtered version of $X_t$ (that is I ...
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Need Guidance on Analyzing Financial Data Across Multiple CSV Files in R [closed]
I'm new to R but experienced in Stata. I'm working on a research project involving 39 countries, each with 100+ years of daily financial data (date, high, open, close, return), along with USD exchange ...
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How to calculate return on investment for an adjustment to a complex options position?
Say I currently hold a set of options positions with the same symbol/expiry that collectively have a net present value based on the estimated value at expiration of +10. I could also liquidate the ...
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Estimating Appropriate Risk Premiums without Comparable Project Data
Objective
I wish to estimate an approximate reasonable return (a) for a project, given its inherent risk and risk-free rate, and compare that to the anticipated project return (b).
Such that, all else ...
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How do you define returns when price may be negative (electricity price)?
I'm trying to model GARCH volatility on electricity prices. Typically the first step is to use prices to obtain log returns to make them stationary. I have encountered a small problem however: ...
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How to Normalize Weights When Weights don't sum to 100%
I'm working on a take-home assignment for a company. They want me to calculate the return of a portfolio of securities over time, given the returns of the securities over time and the initial ...
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how to calculate YTD return including the paid dividends
I am looking for a way to compute YTD return and I found this question (calculate YTD return / find first available datapoint of a year in python), however, it seems that it does not include the paid ...
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Fama French Factor adjusted returns
I want to understand the extent to which portfolio performance can be explained by the three Fama French Factor model. I use the following approach:
Regress the portfolio's excess returns against the ...
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Trying to understand the notion of required return
I have been thinking about the notion of required return lately. I am not familiar with a formal definition, but I have tried to reason my way towards one. Please let me know if my approach makes ...
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Correlation between CDS return relevance
I see that there is much literature that uses the correlation notion in the equity returns to construct a graph or look into how they are related to one another. If we want to extend this to Credit ...
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Daily returns over many days of two-stock portfolio - averaging
I'm reading Ernest Chan's book “Quantitative Trading: How to Build Your Own Algorithmic Trading Business 2E”. In example 3.4 of chapter 3, he defines:
The daily return of a stock on day $d$ as $...
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Total Return on Bond [closed]
I'm trying to calculate the total return (in %) on a 9% coupon 20-year bond with the following assumptions:
reinvestment rate of 6% annually (3% every six months)
terminal yield of 12% (semiannual ...
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How does one calculate carry-roll-down theoretically assuming expectations of short-term rates are realised
I am not asking for an explanation that is hugely quantitative, but rather one that is more intuitive.
I am aware that there are different assumptions that one could take when it comes to carry-roll-...
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Variance of the price from returns variance
Let's say that we have the variance of the daily return at $t_0$:
$$\sigma_{r_{t_0}}^2=\text{Var}[r_{t_0}]=\text{Var}[\frac{S_{t_0}-S_{t_0-1}}{S_{t_0-1}}]$$
for price process $S_t$. Is there a way to ...
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Figuring out how TradingView calculates the Sharpe ratio [closed]
This is the simplest backtest I've come up with, yet I can't figure out how TradingView has calculated the Sharpe ratio to be 0.577. I've set the risk_free_rate=0. Is it possible to extract the ...
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Why can I use equilibrium asset pricing models to predict future returns?
This is a general question that applies to the CAPM and any version of the APT (e.g. the Fama & French three factor model). Speaking in terms of the APT:
Assuming a simple one-index version of the ...
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Estimating Returns with the Non-Central t-distribution
The Boost C++ Libraries provide a set of statistical distributions in their Math Toolkit library. The best candidate I can find among those available that will capture skew and kurtosis typically ...
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Is there a formal notion of a "reward measure"?
A risk measure, as defined in the Wikipedia page, is a function that maps random variables to real numbers and satisfies the normalized, translative, and monotone properties. There are many other ...
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Does the expected return increase with variance for stocks? [duplicate]
I took a historical dataset of ~2600 stocks and computed the 30-day returns for non-overlapping windows, for a 9 year period. For the returns, I computed the mean and variance. Then I plotted the mean ...
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Calculating log-returns across multiple securities and time
I've been getting very confused on the topic of calculating returns. To get cumulative returns in time, log-returns are used, but apparently log-returns aren't used across different securities at a ...
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How to calculate "portfolio cumulative return" from individual price data and weight of them?
I'm trying to run backtest in a vectorized way using Python Pandas and need to calculate a portfolio cumulative return from price data and weight of asset data.
I ...
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Intraday tick volatility between a time interval
I would like to calculate intraday tick volatility between a time interval A to B.
E.g. If I have the quote and trade ticks for an instrument between 2023-02-17 10:00:02 to 2023-02-17 14:30:00, would ...
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How to annualize Sharpe Ratio if monthly returns are serially correlated? Calculation of autocorrelations
I am looking at a data set of 60 monthly returns (last 5 years) and want to calculate an annualized Sharpe Ratio.
The usual way of doing this is to calculate the monthly Sharpe Ratio first, and then ...
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long short portfolio sharpe ratio
What is the proper way to caluclate sharpe ratio for the long short portfolio? When I calculate daily return with no cost, I use this formula: (return for long k.mean()+ (-1)*(return for short k.mean()...
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Bias-Variance tradeoff for Covariance Estimation w/ Different Frequencies
In general, what does the bias-variance tradeoff look like when estimating covariance matrices with varying return frequencies (i.e. daily, weekly, monthly returns)?
From my observations I've noticed ...
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How to identify daily returns as an unusual daily return given a dataset
I am currently calculating daily returns of a stock with the following formula:
$$R_t = \frac{P_t - P_{t-1}}{P_{t-1}}$$
However, once I have the data, I am unable to establish a range to classify the ...
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Backshifting Price Timeseries with Memory Preservation
In Advances in Financial Machine Learning the author makes a case for fractionally differentiated price returns in chapter 5. The reason is to both maintain memory and to generate a stationary time ...
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How to derive the sharpe ratio for an intraday strategy
I have an intraday strategy, which will place 0-5 trades for each intraday trading session. (Note that some days it will not place any trades out). The average duration of a trade is around 33 minutes....
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Taking into account of transaction cost and initial margin into calculation of Returns and Sharpe Ratio
As a follow up question to this question
How to take into account of transaction cost in return and Sharpe Ratio?
I am thinking that if I need to take into account of transaction cost, and suppose I ...
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Student-t measure of return volatility and time scaling
I have a series of price returns of an asset (4 days worth of data). They are relatively high-frequency.
My ultimate goal is to calculate realized volatility, but using a student's t-distribution.
I ...
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combining forecasts at different time horizons
I define a prediction of return of an asset as the following: at time $t=0$, I use my data and output that I expect the asset to make the following returns (in expected value) in the next n intervals $...
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Does anyone know of a proof of the multiplicative central limit theorem?
I have been told there is a multiplicative CLT. It says that - no matter the shape of returns distributions - if you multiply consecutive iid RVs (centered at 1.1, for instance), then a lognormal is ...
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Am I able to find individual returns from total weighted average of returns? [closed]
As titled states… I am trying to figure out how to solve for individual return given average weighted total return and weights of individual returns?
For example:
2% = (r1 x 0.2) + (r2 x 0.5) + (r3 x ...
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Mean of diffusion term not zero using NORMINV? [closed]
maybe this is a question considered too basic for all of you but im new so please excuse:
I wanted to buid a simulation in excel using the usual suspect(STANDNORMINV(RAND()) and i tried to calculate ...
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Calculating the returns of a long/short strategy
I feel like an idiot asking this but i haven't found the answer anywhere.
I have backtestest a paris trading strategy, while calculating the returns of the strategy I run into some problems when the ...
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Appropriate method for calculating negative returns on a trading strategy?
I have a cumulative profit/loss time series below for a trading strategy, what is the appropriate way to calculate the returns in percentage for such a series?
My issue is the appropriate ...
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Correct calculation of returns from a pairs trade
I am trying to understand how pairs trading works but I am confused about how to go about calculating the return on the pairs trade when I reverse my positions. I have been reading 'Pairs Trading - ...
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Daily vs Monthly vs. other return for volatility calculation?
I thought I read/heard somewhere that annualized volatility, using monthly returns vs daily returns is usually lower. With that said, I can't seem to find any papers on this.
Does anyone have any ...
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calculating probability of a return below a specific value [closed]
assume a probability distribution with a mean of %10 and standard deviation of %1.5. In wanting to solve the probability being lower than %5, the normal distribution is written down and integrated as ...
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