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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67 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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23 views

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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49 views

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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1answer
49 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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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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1answer
70 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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31 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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22 views

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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1answer
176 views

Are Kenneth French Research Returns log-Returns?

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

Black Litterman - numerical instability

I am trying to work out the formula for the posterior mean in Black Litterman's model assuming 100% confidence : Ref: https://corporate.morningstar.com/ib/documents/MethodologyDocuments/IBBAssociates/...
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1answer
156 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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48 views

Computing squared returns given differential equation for prices

I am looking for general advice on how to start tackling the problem below. My background in math is fairly bad when it comes to stochastic differential equations, but if you have any recommendations ...
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38 views

Bootstrapping to Judge the Fit of a Sampled Return Distribution

Consider the following: I have sampled yearly stock returns from a specified distribution. What I want to do is compare how well my sampled distribution fits the empirical distribution of yearly ...
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283 views

Calculating realized volatility of high-frequency data

I am wondering how to calculate the realized volatility. Sources such as say that the realized volatility is the sum of squared log returns sampled at a given frequency. So using 30 minute frequency ...
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41 views

Generate P Value from stationary bootstrap following Politis & Romano (1994)

For my master thesis I am analyzing the performance of trading strategies. For this I need to avoid data snooping by utilising the FDR approach. I follow closely the procedure presented by Bajgrowicz &...
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23 views

Is variation in price-dividend ratios that is attributable to excess returns due to variation in returns or variation in risk free rates?

Cochrane and Fama show that "all variation in price-dividend ratios corresponds to changes in expected excess returns -risk premiums- and none corresponds to news about future dividend growth". Is ...
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Average return per period for a total loss

Short version: Is there a meaningful notion of "average return per period" for an investment whose value falls to zero over time? Long version: Call the gross return on an investment the ratio $\...
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1answer
98 views

Why should we care if the “squares of returns are independently distributed over time” to choose an adequate model of the distribution of returns?

In a Time Series Book by Hashem Pesaran, he mentions that there are a number of issues that need to be addressed in order to choose an adequate model for predicting asset returns. I understand the ...
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103 views

Simulating asset returns: (Academia) state of the art

I want to run some simulation studies of (linear) factor models and for that reasons I am wondering about the features such a simulation should contain - every suggestion is welcome, I'll do my best ...
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315 views

R squared statistic in predictions of returns

My question is related to an article which use predictive linear regression for the stock returns. There is told that R squared statistic of 1.6% is high. How can we measure which R squared is high? I ...
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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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76 views

Price return or total return for GARCH models

Is there a problem in modeling total return rather than price return when using GARCH models? My line of thinking is that total return includes dividends, which is only a "pseudo-random variable" in ...
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1k views

Calculating weekly portfolio returns for portfolios sorted by volatility

I am having some issues with finding the right code in STATA for sorting the data into portfolios by historical volatility (standard deviation) of returns and then calculating portfolio returns and ...
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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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student-t asset path

I am trying to simulate an asset path based on a t-distribution. I found a lot of ressources and the fact that it will be difficult to do a path. But now I changed my Geometric Brownian Motion ...
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382 views

R:log return calculation for panel data structure

I have a long form panel for hourly prices of stocks. I want to do log return calculation for this panel data structure. This is sample data: ...
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3answers
58 views

find the qth lower tail quantile

I have daily currency returns. For each month, I have to find the return associated to the 5% lower tail quantile for each currency (the lowest return or the second lowest return). Could you please ...
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77 views

Computing Overall Return for A Single Asset Given Inflows & Outflows

I am creating a portfolio tracking model in Excel and have run into difficulty on how to track the overall performance of a single asset, given that over time more and less capital (shares) has been ...
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622 views

How to calculate cumulative returns with one lag in R

I have a huge data frame with over 1000 column, which are companies(column headers) and in each column I have their estimated return(monthly). The sample period of the data frame in 11 years. I want ...
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93 views

Determining the investment strategy

I have the following problem: Consider the 5 year investment strategy and given the yearly portfolio returns $S_{t+1}/S_t$ and dividends $D_{t+1}$ paid at $t+1$ which are modeled as: $\frac{S_{t+1}}{...
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1answer
127 views

Fitting (marginal/multivariate) distributions to financial return data

I have calculated the simple arithmetic return on a number of different financial securities and am fitting both a Student-T and Generalised Pareto Distribution. My question is can I just use the ...
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120 views

Confused on interpretation of betas/alphas in regression in finance

I ran a regression on two stocks. I don't have the data in front of me, but it is a more conceptual question. Let's say SP500 returned a total 23% return over this time period and MSFT returned 9%...
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92 views

Calculating Asset Returns

The question pertains to a simple phenomenon. There is gold futures listed on Exchange A and Exchange B. Exchange A and Exchange B overlap times with A and B starting 8 hours later and A and B ...
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79 views

Sampling and/or asymptotic distribution of a function

Assume we have the following function: $$f(p) = \frac{1}{(1-p)d}\ln\left(\frac{1}{T}\sum_{t=1}^{T}\left[\frac{1+X_t}{1+Y_t} \right]^{1-p} \right)$$ where $d$ is a constant $T$ is a constant $X_t$ ...
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1k views

Long/Short portfolio return

Suppose I have a Po with one long, one short positions and some cash (to balance the short + 50% margin) as shown below: ...
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146 views

Return on a CDS portfolio

Good evening, I try to compute the performance of a portfolio of a CDS. I already know how to mark-to-market a CDS but typically, the first time you enter a CDS, you invest zero as the mark-to-market ...
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2answers
96 views

What returns to use?

I have monthly returns of my portfolio... I would like to summarize the performance over a longer period in one overall figure. Should I use log returns per month then use geometric mean on the log ...
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3answers
2k views

How to calculate annual returns from daily prices?

Suppose I have daily adjusted closing prices for SPY, for example from yahoo finance. How from this calculate annual return? Note: It's NOT about issues like 1.2 means 20% or 0.2 means 20%. The ...
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1answer
638 views

average return Vs cumulative return interpretation

I am looking for the interpretation which distinguishes between average return and cumulative return. I have two portfolios : the average return of portfolio 2 = 3 10E-4 per day while the average ...
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2answers
164 views

Correlation between 2 stocks [closed]

If Stock A returns 5% on average in year Y And Stock B returns 2% on average in year Y Does this mean that correlation is 40%?
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598 views

Geometric Variance

If the arithmetic mean is: $ \frac { \Sigma (x_i) }{n}$ and the geometric mean is $ (\prod (1+x_i) ) ^{1/n}$ The arithmetic variance is $ \frac { \Sigma(x_i-\mu)^2 } {n} $ then what is the ...
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1answer
307 views

Pandas: Close-to-Open return on stocks

I am trying to daily calculate the close-to-open return for j stocks for t days. Is there anyway I can calculate without using a for loop? I have one Dataframe for daily close prices and one for daily ...
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1answer
130 views

portfolio returns when portfolio value is negative

I am being very stupid probably but I don't understand the following. Portfolio 1st Jan valued: -$100 A month later Portfolio 1st Feb valued: -$45 I calculate the return of the portfolio as, <...
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73 views

Is there any relationship between investment return of a stock, for individual year (Yearly return) and multiple years (Overall annualized return)

currently, I'm calculating the return of a stock, for individual year and multiple years. I tend to answer the following question. Return of a stock for end of year 2010 (Individual year) Return of a ...
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2answers
265 views

question on XIRR (excel)

Let's say we have an initial investment of -10 on 1/1/2000, and from 1/1/2001 to 1/1/2018 (with annual payments on Jan-1 of each year for 18 years) we get a CF of +2 each year with a final payment of ...
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1answer
392 views

How to calculate the annual contribution of a fund to a portfolio of funds?

let's assume I have a portfolio of two funds (call them F1 and F2), where, by convention, there is a monthly compounding of the returns. On a monthly basis, the contribution of each fund will just be ...
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2answers
175 views

Questions on continuously compounded return vs long term expected return

I have reading a paper from Oliver Grandville on long term expected return. I am trying to reconcile what I am reading in that paper vs what I see under "Application to Stock Market" in Kelly ...
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1answer
79 views

Converting international equity returns to USD

Background: I am trying to replicate some results from the Betting Against Beta paper by Frazzini & Pedersen (FP). (http://www.econ.yale.edu/~af227/pdf/Betting%20Against%20Beta%20-%20Frazzini%...
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504 views

Estimation of annualized volatility depending on data frequency - exceptions to the general rule?

From my understanding, the annualized standard deviation of daily returns is generally higher than of annualized standard deviation of weekly returns is generally higher than.... monthly...quarterly......
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2answers
388 views

Volatility of EUR/USD: is this correct?

Let x be the closeBid price of EUR/USD, sampled every 5 minutes during year 2015 (historical data). This is the variation (is it ...