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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2
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2answers
2k views

Calculating Momentum From Returns

I am doing some modelling and have some data: ...
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1answer
496 views

Toy models of asset returns

When making simple agent-based models of banking systems to look at global properties (say systemic risk) one of the basic decisions you have to make is how to model returns on external (to the ...
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1answer
117 views

Limits analysis

I have a few time series of models to analyse in terms of how far/close they are to their underlying limit. The limit is a simple value on the y-axis (always positive), and the series can act ...
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2answers
621 views

When gains are made: Overnight or during trading hours? What is the connection to volatility?

Falkenblog reports an interesting finding: All of the stock returns since 1993 are from overnight returns and cross-sectionally, volatility receives a positive overnight risk premium, a negative ...
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12k views

What kind of return can an average algorithmic trading firm achieve today?

What kind of rate of return can an average, equities-focused algorithmic trading firm expect to achieve today? I come from a background of control and optimization, working in the industry in China, ...
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1answer
6k views

Skewness and Kurtosis under aggregation

Returns possess non-zero skewness and excess kurtosis. If these assets are temporally aggregated both will disappear due to the law of large numbers. To be exact, if we assume IID returns skewness ...
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1answer
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How to annualize skewness and kurtosis based on daily returns

I'm trying to annualize the four moments based on a string of daily returns (continuously compounded) for 11 years. The formulas for the annualization of the mean and the standard deviation I did ...
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1answer
232 views

How to group mutual funds by volatility?

I want to group Mutual Funds by their volatility. Ideally, I would like to end up with the mutual funds beings attached to different groups: High volatility Medium volatility Low Volatility My ...
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3answers
4k 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 ...
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0answers
230 views

Probability Density of Returns of Bonus Certificates

Could anyone please help me with the following? I need to generate a histogram (resp. probability density) of returns of a bonus-certificate. A bonus-certificate can be replicated by an underlying ...
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1answer
84 views

Accounting for Withdrawals

I am trying to wrap my head around the proper way to do this. I would like to simulate the portfolio value adjusted for inflation with a fixed withdrawal rate. To simulate withdrawal rate, I will ...
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Is it more accurate to analyze returns on a calendar day basis than a trading day basis?

I'm rather new to the actual practice of this kind of analysis, but it just seems wrong to me to throw Mondays' returns in with the rest without accounting for the passage of time on the weekend when ...
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1answer
160 views

Methods for distributing cash into allocation

Are there any methods/techniques that cover distributing cash into a specific percent of a portfolio asset class while gaining the best average price? As a simple example, a portfolio starts with ...
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362 views

How do I statistically differentiate a series of prices from a series of returns?

I developed an optimization algorithm that uses returns (among other parameters) as input and basically output an allocation. As I'm pretty happy with the results, I am in the process of putting the ...
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1answer
15k views

How to annualize log returns? [closed]

I have daily log return from 01.01.2011 to 10.28.2011 and I'd like to compare the total return of that 10 months period (which is of -7.093%) to annual log returns of previous years. I know it's ...
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1answer
2k views

Price volatility instead of return volatility for spread option parameter

I overheard someone at work today talking about a commodity spread option pricing model and he was asking our quant if he should use price volatility instead of return volatility as the volatility ...
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1answer
200 views

What are some common models for one-sided returns?

One typically models the log returns of a portfolio of equities by some unimodal, symmetric (or nearly symmetric) distribution with parameters like the mean and standard deviation estimated by ...
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1answer
694 views

Should cointegration be tested using close or adjusted close prices?

When doing cointegration tests should I use the adjusted close price or just close price for the time series? The dividend of each stock is on different dates and can cause jumps in the data.
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What is a reasonable upper bound on the performance of a daily trading strategy?

I am backtesting an equity trading strategy which trades only once per day. Is there a general rule of thumb for the reasonable upper bound on the rate of return of such a strategy? For example, a ...
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907 views

How do you correct Max Draw-Down for auto-correlation?

When returns are auto-correlated, calculating a Sharpe ratio := $\frac {mean(x)}{\sqrt{var(x)}}$, (where $x$ are the returns) is complicated, but basically solved (see, e.g. Lo (2005)). Without the ...
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Correct way to find the mean of annual geometric returns of monthly returns?

Say I'm given I set of monthly returns over 10 years on a monthly basis. What is the correct way to find the geometric returns of this data? I ask because a classmate and I are on different sides of ...
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Quantmod: what's the difference between ROC(Cl(SPY)) and ClCl(SPY)

I feel like I'm missing something fundamental here, but I can't shake the feeling that these two series should be equivalent. /edit: there is also dailyReturn(Cl(SPY)). I've seen all 3 of these ...
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1answer
581 views

Convert returns into an index? [closed]

What's the right way to take a series of returns and convert it into a continuous index? Let's say I want to show the performance of a strategy starting from 1, and adding on returns so that I get an ...