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.
498
questions
1
vote
2
answers
435
views
What are the units of the variance of returns?
I am a little confused about the units of the variance of returns. One way to compute that would be to look at the units of returns-
$$r=\frac{1}{\Delta t}\ln\frac{P(t+\Delta t)}{P(t)}=\text{...
2
votes
0
answers
89
views
Expected returns and Fama-French Factor Model
It is my understanding that for any given stock, the sample mean of historical returns is not a good proxy for the stock's expected return. In fact, the return on a stock needs to be estimated via ...
1
vote
1
answer
248
views
Are return time series ergodic?
It seems intuitive to me that return time series would be ergodic. Is there a test statistic that I can use to check this? Would this be affected by sampling rate?
One way I can think of checking ...
1
vote
3
answers
7k
views
What is better: A negatively skewed return or a positively skewed returns distribution?
I noticed that in certain literature, like in CFA level 1, the theory put forth is that someone should prefer positively skewed returns as mean > median > mode. But why is that?
Based on a ...
9
votes
2
answers
1k
views
Term structure of Equity returns
What is the meaning of term structure of equity returns.
I know what term structure of interest rates means, but somehow i cant seem to relate them.
Also, how would we measure them?
Also in this paper ...
0
votes
2
answers
218
views
Annualised returns and volatility for 3 month data
I have a portofolio with 30 indexes and I want to calculate the annulised returns and volatility because I want to compare it with another portofolio with different number of indexes (but same time ...
1
vote
0
answers
103
views
Predicting smoothed returns
Due to the extremly low ratio of signal to noise in financial data, predicting raw returns is very difficult.
If we smooth out the price time series, say by an EWMA, and then calculate returns on this ...
0
votes
0
answers
63
views
Proper way to measure portfolio returns
I have a peculiar trading strategy and I can't seem to be able to find a proper way to measure its performance.
Background:
The strategy consists of buying certain stocks and then selling them in ...
0
votes
0
answers
135
views
How skewed are FX returns? Does this look like a plausible histogram of EURUSD?
I'm reading about volatility. I've charted the histogram of EURUSD and I am wondering if this looks plausible? What I've charted are the 1-hour percent change returns (not log returns). I've removed 0 ...
1
vote
0
answers
44
views
Novy-Marx Profitability "Excess" returns - What does Excess mean here?
I am reading Novy-Marx's paper titled "The other side of value: The gross profitability premium".
Throughout the paper, he mentions excess returns in several tables, but I cannot find any ...
2
votes
0
answers
200
views
Matching periodicity Fama-French Factors, Portfolio Return and Risk Free rate
I am trying to replicate certain aspects of the following paper: "Does the stock market fully value intangibles? Employee satisfaction and equity prices" - Alex Edmans (2011) for three ...
0
votes
0
answers
575
views
weekly returns and the daily returns scaled to weekly
I am new in this blog and first of all I want to apologise for my english.
I have to calculate, for a university project, the weekly returns and daily scaled returns to weekly for few stocks
For ...
0
votes
0
answers
2k
views
Log excess returns calculation
I need to calculate log excess returns.
I'm given market level monthly total return index, price index and a risk-free rate (from Fama/French 3/5/etc. factors).
I'm not sure whether I'm calculating ...
-1
votes
1
answer
143
views
Covariance Matrix for asset returns [closed]
Hey guys I'm pretty new here, not sure how to code my question so I'll include a picture reference instead. I'm a bit confused on how the standard deviation of F (commodity price) would affect the ...
1
vote
3
answers
880
views
Why can we assume that asset return rates are normally (or lognormally) distributed?
In many theories of financial mathematics it is assumed that asset return rates are normally distributed (e.g. VaR models) or lognormally distributed (e.g. Black-Scholes model). In practice, asset ...
1
vote
0
answers
434
views
Is Total Return data for mutual funds on Bloomberg adjusted for fees/expense ratio?
I'm comparing the performance of mutual funds using monthly returns data from Bloomberg. I use the Day to Day Total Returns (Gross Dividends) field represented in Excel by ...
1
vote
0
answers
537
views
How to annualise hourly returns?
I have hourly open,high,low,close candles data for a particular asset. I wrote my own algo and some back testing code that replays the data from the past hourly candles to calculate the total return ...
1
vote
1
answer
515
views
How to compute returns of a Pairs Trading Strategy with different holding periods?
I am currently working on a project where I am testing a Pairs Trading Strategy based on Cointegration.
In this strategy I am considering to trade a couple of hundred stock pairs every day over a time ...
2
votes
1
answer
816
views
T-statistics on monthly returns vs annualized monthly returns
eqI am very confused about a very basic question. This is probably more statistics than quantitative finance, but still, should be useful for this stackexchange board as well.
Let's assume I have ...
0
votes
3
answers
388
views
How to calculate a Corporate Bond Transaction Price (Bond returns?)?
I am struggling with the concepts and variables of corporate bonds returns.
Bai, Bali and Wen (2019) define monthly corporate bond returns as:
Where where is transaction price, , is accrued ...
1
vote
4
answers
9k
views
Calculate weekly returns from daily stock prices?
If I have log returns for a specific stock, then the weekly log return is the log of Friday's closing price minus the log of Monday's closing price, i.e. $R_{weekly} = log(Price_{Friday}) - log(Price_{...
1
vote
0
answers
251
views
Calculating returns from transactions
I have a collection of client transactions representing the trades of a single portfolio across multiple securities. What I'd like to do is the calculate the accurate ROI of each security and of the ...
1
vote
0
answers
54
views
What is the name of this concept/formula?
I stumbled on this not so complicated concept and couldn't figure out what it's called.
I want to buy something that costs $M$ units of money, and have to pay it in $n$ months at a rate of $\frac M n$ ...
1
vote
0
answers
121
views
How can a stock have negative returns but positive 3-factor alpha?
I've come across a research paper where for a specific period of time, the portfolio has negative returns (or roughly flat returns). During this same period of time, the portfolio's Fama-French 3-...
0
votes
2
answers
85
views
Compute 6 Month Returns using Monthly Returns data
I have data containing 6 months returns of a stock.
...
1
vote
1
answer
255
views
pairs trading algorithm with returns
I'm having a difficulty grasping how to write a pair algorithm using returns instead of prices.
With price differences, I have the mean difference over a long time period. When the current price ...
2
votes
1
answer
690
views
Return Contribution for Annual Returns
I have a portfolio $p$ made up of a bunch of assets $i$ where the weights change slowly over time. The returns over each period $j$ composed of the weighted returns of the asset $r^j_p$
$$
r^j_p =...
2
votes
1
answer
234
views
Covariance matrix for multiple assets - Second attempt
Ok, on the advice of administration I open a new question, hoping that in this way it becomes clearer.
Like I said before, I am trying to understand how the authors of this (page 76) and this (page ...
0
votes
0
answers
49
views
Prices and returns
I want to convert the payoff of an Asian and a lookback Call option with prices in their corresponding with returns. Example: for an European Call $\varphi(S_T)=(S_T-K)^+$, so knowing that $S_T=S_0(1+...
1
vote
0
answers
73
views
How to calculate portfolio returns from assets with different valuation frequencies and return methdologies?
I have a situation in which I'd like to calculate a total portfolio return for a portfolio made up of funds with different valuation frequencies and return methodologies.
As an example, say I have a ...
2
votes
0
answers
40
views
Boundaries on the single-period returns
I know that $e^{t\mu_{\operatorname{log}}-\Gamma\sqrt{t}\sigma_{\operatorname{log}}}\leq \widetilde{R}_t^S \leq e^{t\mu_{\operatorname{log}}+\Gamma\sqrt{t}\sigma_{\operatorname{log}}}$, with $\mu_{\...
11
votes
5
answers
14k
views
Calculate Average Price, Cost, (Un)Realized P&L of a position based on executed trades
We have built an algorithmic trading software and need to calculate the following parameters for each position in our portfolio.
Average Price
Cost
Realized Profit & Loss
Unrealized Profit & ...
2
votes
1
answer
223
views
Is it always better to use the entire distribution of a financial returns series, not just $\mu$ and $\sigma$?
In finance models that use historical returns for inputs, including option pricing models, forecasting and portfolio optimization, only the statistical moments of the returns distribution, $\mu$ and $\...
1
vote
0
answers
70
views
Please help me understand this dataset regarding stock prices
I am supposed to predict column E but I cannot figure out what any of these columns mean. The information provided with the dataset is as follows:
column A: past 28 week slope value
column B: past 48 ...
1
vote
0
answers
60
views
Relationship between risk and return for GBM and riskless bond
Suppose we have $S$, a stock following geometric Brownian motion ($dS_t = S_t (\mu dt + \sigma dZ_t)$ for $Z =$ Brownian motion) and $B$, a zero coupon bond with rate $r$, i.e. $dB_t = rB_t dt$.
In ...
0
votes
0
answers
43
views
Estimating the XIRR of a very non uniform cash flows
It's my second post, so please bear my lack of experience in this field.
I've a very irregular cash flow (here you can see the set of date - cumulative cash flow)
The XIRR, calculated with Excel, is ...
1
vote
1
answer
101
views
Event study using sector indices
Analyzing Covid-19's impact on different sectors I would like to use sector indices.
Can you use CAPM or similar to calculate abnormal returns of indices or does it only work with stock prices?
0
votes
1
answer
113
views
Which relation stands between IRR and the cumulative profits?
In the graph below you can see an irregular Cash Flow.
The graph is cumulative, on the y axes there are moneys, on the x the dates.
In the second graph the IRR (...
3
votes
0
answers
316
views
Does the Shannon entropy of stock returns change over time?
Shannon entropy, $H(X) = -\sum_{i=1}^n p(x) \ln p(x)$ is a probabilistic measure of randomness or disorder within a random variable's probability distribution or histogram.
If we take rolling window ...
0
votes
1
answer
198
views
How to calculate Money-weighted Rate of Return when there are multiple negative cash flows during investment period?
I know that when there are multiple changes of sign in the sequence of cash flows of a project, the project may have multiple IRR, which render this criterion impractical. Therefore, in such ...
2
votes
1
answer
116
views
Correlation sensitivity in multivariate $t$-copula for portfolio VaR of electricity futures using Kendall's tau-$b$ correlation matrix
My t-copula model captures the daily dollar returns of a portfolio of approximately 400 assets. I am curious if there's a generally accepted way to quantify the sensitivity of portfolio movements with ...
0
votes
3
answers
1k
views
Modelling NPV with negative cashflows?
When making capital investment decisions that have cost saving implications instead of cash flow generation, is NPV still valid?
For example:
A state wishes to decide whether to replace a section of ...
2
votes
2
answers
1k
views
How to calculate monthly returns in R for every company in a dataset of 4000 companies?
I want to calculate monthly returns for a time series of 4000 companies between 2014 and 2019.
This is how my dataset looks like
I'm using the following code to calculate the returns
nyseamex <- ...
0
votes
1
answer
245
views
Using Taylor formula with logarithmic returns
I would like to calculate PnL scenarios for an FX portfolio using Taylor series approximation:
$$
\begin{align}
\text{PnL} \approx \delta \Delta r + \frac{1}{2} (\Delta r)^2 \Gamma
\end{align}
$$
I ...
0
votes
1
answer
143
views
How to up-sample monthly returns into daily returns?
I know how to down-sample daily returns (large-sample data) to monthly returns (small-sample data) by using rolling windows, which feels like estimating a sub-sample from the population (something ...
0
votes
0
answers
133
views
Cumulative returns from ROI of individual trades
I've a series of ROIs: $R(n) = [r_1, r_2, ... r_n]$ generated from taking $n$ trades. Each ROI value is in percent $[0, 1]$. How do I generate cumulative return $C(n)$ from this data?
My understanding ...
0
votes
2
answers
595
views
Calculating excess returns with 3M T-Bill
I have to calculate weekly log excess returns using the 3-month T-bill. However I am not really sure if I am doing this correctly. This is what I did:
first I calculated the returns with ln(price/...
1
vote
1
answer
259
views
Calculating Dollar-Neutral Strategy Net Return
An example in the book, Quantiative Trading, the net return of a dollar neutral strategy of IGE and SPY is calculated.
...
8
votes
5
answers
9k
views
How to calculate compound returns of leveraged ETFs?
Forewarning: this is a complete newbie question :-)
I am starting to learn about ETFs by trying to do the numbers. When learning about the compounding effect in leveraged ETFs, I wanted to simulate ...
0
votes
0
answers
117
views
Inter-temporal structural stability of stock markets
For my bachelor thesis I am trying to determine structural stability of some stock market in the following way:
Identify an ARMA model for the whole sample
Split the sample in two parts, and estimate ...