# 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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### 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 ...
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### 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?
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### Performance return of holdings if you know the returns of top10 holdings?

I think this is a simple question, but struggling to get my head around it. There is a fund that showcases its top 10 holdings and their respective weights. I want to infer the performance of the rest ...
74 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 (...
150 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 ...
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### 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 ...
74 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 ...
111 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 ...
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### 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 <- ...
49 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 ...
49 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-...
54 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 ...
80 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 ...
38 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 ...
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### 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/...
90 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 ...
51 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. ...
5k 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 ...
108 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 ...
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### variance of asset returns linear for time

I am reading Wilmott's book, "Quantitative Finance" and try to understand the derivation that the variance of asset-returns, $V[\Delta S/S]$, is a linear function of the time step $\delta t$....
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### internal rate of return ((M/X)IRR ?) of a fund

I have the following data for a fund. The contributions come from the LPs (i.e., the investors invest more in the fund, or withdraw money from the fund), MV stands for market value. The timing is not ...
22 views

### Calculation of 5-minute returns

My goal is time series clustering, I would like to compare 5 minute returns, liquidity seems to be very low sometimes, so is it better idea to calculate average volume weighted price in 5 minute ...
80 views

### Do EWMA weights remove autocorrelation in asset returns?

I know that the exponentially weighted moving average (EWMA) volatility estimator drapes a decaying weight function over historical returns in order to weight the past according to the decay of their ...
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### Portfolio models that maximize cumulative returns

Portfolio optimization typically looks at minimizing portfolio volatility, or maximizing the portfolio's Sharpe ratio (risk-adjusted return), but are there any recent, reasonable approaches to ...
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### Why do cumulative returns have a bimodal distribution?

Regular returns (log-differenced prices) have statistical distributions that are bell-shaped and unimodal (one mode/peak) despite being non-normal and fat-tailed. Cumulative returns, on the other hand,...
5k views

### What are DGTW adjusted returns?

Many papers, e.g. in The Journal of Finance, discuss DGTW adjusted returns (or DGTW abnormal returns) instead of just returns. What are these and how does one compute them?
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### How to compute portfolio returns when constructing a dollar-neutral portfolio

I am trying to wrap my head around this statement: dollar-neutral portfolios are built: dollar amounts of both long and short positions are equal. Furthermore, it is also true at the stock level: ...
38 views

### How to annualize skewness and kurtosis of a forecasted distribution

I have a (non-normal) distribution of expected cumulative returns 10 quarters in the future, from which I have calculated mean, standard deviation, skewness and kurtosis. I would like to annualize ...
48 views

### Cumulative returns are more correlated than non-cumulative

I was just comparing two daily returns series and noted that the correlation between them is a lot higher if they are cumulated (about .95 for cumulative returns, vs .15 for non-cumulative). I feel ...