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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41 views

EONIA capitalisé jour tr eur: can't find index data! Do you know what kind of index is?

To get EONIA capitalisé jour tr eur index returns (monthly returns from 01/2007 until the most recent) is challenging. First i googled the index name searching for the ISIN or the index provider ...
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78 views

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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83 views

How to calculate the daily rate of return for an actively traded account

I have a spot currency exchange account where the base currency is USD and where I can deposit and/or withdraw money from the account in any currency at any point in time. I can also exchange any ...
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66 views

Jensen’s Inequality for returns on short positions

this is puzzling me. Say you have an asset A, that on day t+1 returns 1%, and then on day t+2 returns 1% again. If you invest $1 in A on day t (take a long position), then on day t+2 you have earned:...
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27 views

What is the difference between Rolling Returns and Moving Average and how to calculate them?

So I understand what a moving average is and how to calculate it. I'm using this numpy function for it. I am somehow confused about how to calculate rolling returns. Different sites explain it ...
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78 views

Is it possible to compute implied returns from volatility?

If we assume that, broadly speaking: Assets in liquid markets are fairly priced to its value Volatility is predictable (volatility clustering, GARCH, etc) Investors are rewarded and earn a return for ...
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Should I use an arithmetic or a geometric calculation for the Sharpe Ratio?

What are the advantages/disadvantages of using the arithmetic Sharpe Ratio vs the geometric Sharpe Ratio? Is one more correct? Or is one better in certain circumstances?
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35 views

Why do these Monthly vs. daily plots differ?

I got my data from Thomson Reuters Datastream. As an Input for my plot i calculated daily Returns based on the Return-Index provided by datastream. Then i plotted the Monthly and the daily Returns.(...
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121 views

Squared returns and volatility

Squared returns are considered pillars of GARCH/ARCH modelling and most used method for forecasting or studying volatility. Can you tell me how to calculate it from simple stock price. Is it better ...
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68 views

What's the interpretation behind this GARCH modeling?

I have an ARIMA model for monthly returns of the brazilian stock market index. Then I test the residuals of the model for ARCH effects. The ACF/PACF of squared residuals show that there are no ...
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61 views

Portfolio return with changing assets over time

I need some feedback on a very basic question regarding the calculation of the portfolio return. I have created an example of a portfolio with two assets and attempted to calculate the return: I've ...
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How to calculate necessary gain to compensate a loss in a financial transaction?

(Feel free to suggest the correct Stackexchange community - or otherwise - if this is not the correct one) When trading financial markets, a gain of x%, won't ...
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How to compute simple and log portfolio returns?

I am looking for more details to perform simple and log returns for an entire portfolio. However, I've only been able to find the following semi-reliable source (see Page 9 and Page 19): Here are my ...
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2k views

How to convert Jensen's Alpha from monthly to quarterly observations

I am being puzzled while calculating jensen's alpha for single stocks. I have monthly returns data and have calculated alpha for each stock on a monthly basis (used 36-month rolling window for beta ...
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109 views

Distribution of simple returns vs logreturns

I understand that stock prices are conditionally modeled using a log normal distribution by the relationship $ y_t/y_{t−1}∼logN(μ_{daily},σ^2_{daily})$ $y_t∼logN(log(y_{t-1})+μ_{daily},σ^2_{...
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141 views

Rate of Return Required on Buying Stocks with Loan

A bank gives a loan $L$ for $m$ months and the monthly interest rate is $i$. The bank requires monthly installments - which I calculate is $I = \frac{L}{m} + Li$. I use this loan to buy stocks....
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42 views

Calculation of IRR Given Stage Assumptions

I am trying to replicate Union Square Ventures Fund #1 model. A number of assumptions are given and the outcomes are listed. I have copied these into google sheets. I am not sure exactly how IRR is ...
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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 ...
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Are the returns in this regression signed returns?

In this paper about combining multiple alphas are the returns signed returns? if not wouldn't they be mean zero? Also, it mentions "realized alpha returns" - does that just mean "realized" past alpha ...
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158 views

Cumulative Return on Futures

In my current backtesting, I am using log returns as a proxy for simple returns via the relationship $\ln(1 + r) \approx r$ for small enough r. This gives me wonderful properties like time additivity, ...
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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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50 views

Efficient Frontier Graph

I'm writing some C code to create different portfolios using a few stocks that are given as inputs. I am having some trouble trying to find if these results are correct. My biggest hesitation is that ...
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4answers
277 views

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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ETF performance/returns

I was going over some ETF return data on yahoo finance and encountered some numbers that did not make sense to me. The image below shows a ytd return of 17.94% and 13.52%. I checked ETF.com and ETFdb ...
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171 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 =...
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Predicting stock returns using principal components of macroeconomic variables

I'm trying to detect return predictability by regressing stock returns on the first couple of principal components of a set of macroeconomic variables. I'm doing this for different stock styles such ...
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54 views

Proof that IRR(A) < IRR(A+B) < IRR(B) ? Ie that the IRR of two cashflows together must be within the range of the IRR of the two cashflows?

The question The IRR of two sets of cashflow is not (necessarily) the weighted average of each set of cashflows. E.g. if ...
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71 views

Should the sum of daily returns be close to monthly returns

I am calculating value-weighted returns with monthly dividends reinvested and for some reason when I sum the daily returns some are a little bit off with monthly returns. Is this normal?
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103 views

Convert Geometric Direct Alpha PME to Arithmetic Excess IRR (PME Alpha / Implied Private Premium)

As a followup to this old question, Private Equity: Direct Alpha vs Excess IRR, I have a new one. In automating PME calculations, the Direct Alpha (DA) approach is computationally simpler and ...
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156 views

What is the correct way to calculate the annualized returns from rolling windows starting from monthly returns?

What is the correct way to calculate the annualized returns in 5-year rolling estimation windows starting from monthly returns? Is it most correct to first annualize the returns (using the geometric ...
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66 views

Logic behind calculating a Carry Multiple associated with Startup Valuation [closed]

I'm reading a book called "The #1 Guide to Startup Valuation: How to value your startup in 12 easy steps" (p. 22-23) by Joachim Blazer. As one of the building blocks, namely "Return", the Carry ...
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48 views

Possible application of Polya's Urn on Portfolio's Investments?

I wanted to find some more information of this topic, but I found very little. I might be interested in optimizing a stock investment portfolio. Maybe I could use beta or some other common risk ...
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56 views

Return On a Spread

This is a beginner level question. I have a $spread = aluminium - 0.7*lead $ $s = a - 0.7*l$ I have two methods to calculate return on this spread: $ return = (s_t - s_{t-1})/(a_t + 0.7*l_t) $ ...
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130 views

Neural Networks for Estimation of Unmarked Private Asset Returns from Market Data

Let's assume it is March and my illiquid private assets portfolio is only 50% marked for 12/31, but I want to get the most accurate estimate of my final return for the quarter ended on 12/31. What is ...
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90 views

Finding Lead-Lag Relationship [duplicate]

Given two series of data, volatility and returns, is there a way (Excel) of finding which one is the leading factor and lagging factor? Thank you for your help.
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376 views

R: Calculating cumulative return of a portfolio

I've downloaded adjusted closing prices from Yahoo using the quantmod-package, and used that to create a portfolio consisting of 50% ...
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63 views

Calculate the True daily Time Weighted Return

I have an access database with records of securities in my portfolio as well as my trades for each security. My aim is to calculate the "Daily Time Weighted Return" then down the line, export it and ...
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38 views

Literature on return sensitivy in respect to: growth, risk and profitability

I am currently writing my master's thesis, wherein I am looking for supporting literature. Specifically, I wanted to know if there had been any research relating to how the: growth, risk and ...
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88 views

Calculate New Portfolio Weights Given Today's Returns

I'm looking for a formula to recalculate my portfolio's weights at the end of time $T$, given a vector of the asset weights at $T$ and a vector of returns at $T$. For example: ...
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32 views

General to specific approach to modelling

I am trying to find the relationship of stock indices across the world. This has been done by the literature, however, I am wondering about the methods chosen. I have decided to go with what I think ...
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59 views

In search of nice (approx) function forms of the volatility of cumulative simple returns

Let's consider a period $t\in[0,T]$, and let the simple return over year $t$ ($1\le t\le T$) be $r_t$. Assume $r_t$ are iid normal. The cumualative simple return over the whole period $[0,T]$ is $$R_T=...
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147 views

How to calculate annualized simple returns and annualized simple standard deviation given historical daily data

I have daily log returns of my asset that run over several years and I would like to calculate a time series of the Rolling Sharpe Ratio. This Sharpe Ratio asks specifically for: Annualized simple ...
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98 views

Short position returns with negative NAV

I am using data on the opening, change and closing of short positions, but I am interested in when the profit/losses are made. Hence, I calculated daily the value of the short position by taking the ...
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36 views

Differences Between Portfolio Daily Average Returns

I have a doubt about the average daily return for a 2 stock porfolio. I have the data of both stock returns over a 1511 day period. I used 2 approachs to calculate the average return. In the first one,...
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163 views

relationship between volatility and equity premium

I am working on the equity premium. Does anybody know one or two authors who address the relationship between volatility and equity premium? I.e. how does vola influence the equity premium? In ...
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51 views

When modelling ARCH/GARCH effects, do we use excess returns?

When modelling ARCH/GARCH effects, do we use excess returns? Is it common in the literature to use excess returns when modelling volatility as opposed to raw return data?
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113 views

What is, here, the relationship between “compound” and “arithmetic return” and “volatility”?

I'm trying to find the exact (ie, not an approximate) relation between the "Compound Return", "Arithmetic Return", and the "Annualised Volatility" as given the assumptions below, and from there the ...
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Sample distribution of cross-sectional statistics of returns

Currently doing an application of VaR on sample of industry portfolios in the US. I have a matrix of $n$ industry portfolios with $m$ time-series observations. I calculate cross-sectionally (for each ...
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190 views

Are Kenneth French Research Returns log-Returns?

Does anyone know if Kenneth French's return data on his website is log returns?