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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26 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 ...
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69 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 ...
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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 $\frac M n$ ...
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171 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 ...
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29 views

Compute 6 Month Returns using Monthly Returns data

I have data containing 6 months returns of a stock. ...
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75 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 ...
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35 views

Bonds portfolio - total return

TRICKY QUESTION ON BOND PF RETURNS I am working on a bond portfolio, so for each line i have a monthly price change (equal weighted by the numebr of bonds in the portfolio this month) then the return ...
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146 views

How does one calculate carry-roll-down theoretically assuming expectations of short-term rates are realised

I am not asking for an explanation that is hugely quantitative, but rather one that is more intuitive. I am aware that there are different assumptions that one could take when it comes to carry-roll-...
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36 views

Return of a bond held to maturity and realised forward rates

Let's assume that forward rates are realised as part of a carry-roll-down scenario. The gross return of a bond under the realised forward assumption to maturity is: $\frac{c(1+f(2))(1+f(3))...(1+f(T))}...
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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 ...
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39 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+...
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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 ...
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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_{\...
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Calculate daily account value & returns on trading system backtest

Quick question, I'm having a brain freeze. I've done a simple system to practice array based backtesting. I was able to calculate my PnL by subtracting the "close" from the "buyPrice&...
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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 ...
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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 ...
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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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31 views

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 ...
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52 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?
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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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59 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 ...
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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 <- ...
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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 ...
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83 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 ...
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43 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 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. ...
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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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34 views

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 ...
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33 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 ...
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117 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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98 views

Convention for computing returns on bond futures

From the CME website, we know that the contract unit for bond futures is "face value at maturity of $100,000". Which of the following is more appropriate the convention to compute "...
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52 views

Formula for coskewness and cokurtosis of LogN to project linear returns

I want to find the coskewness and cokurtosis of the multivariate LogN(mu, sigma) distribution from the moments of a normally distributed multivariate distribution (ie: log returns). These higher order ...
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91 views

How important is the chronological ordering of historical returns?

The returns of asset $A$ in chronological order are 0.03 0.01 -0.04 0.02 0.05 -0.10 0.02 The expected return, or sample mean, is $-0.00143$ while its sample ...
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143 views

Interpretation of a uniform asset return distribution

Typically asset return distributions are bell-shaped with most mass occurring in and around the center, 0% returns, and less so in the tails, with the left tail representing the probability of large ...
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77 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 (...
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129 views

What kind of returns should I use for my model?

I'm building a machine learning model with the aim of learning a daily strategy of buy or sell the stock. I was wondering if I should use adjusted close price or something else to calculate returns (I ...
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Monte Carlo approach and methods for generating random returns

Recently I found myself reading more about Monte Carlo approach in m.v. portfolio optimization framework. I already discuss the topic on this forum (if interested please consider the following links - ...
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52 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/...
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264 views

Are cumulative returns stationary?

Log differenced returns, computed from stock prices, are known to be stationary. What about cumulative returns, are they also stationary? if not why not? Are there other properties, like non-i.i.d., ...
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42 views

How to deal with missing stock returns?

If I want to calculate the Covariance between two stocks but there are missing days in both, how can I deal with missing data? I want to use Pairwise deletion and only use the days of which both ...
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92 views

Calculate annualized returns and annualized volatility from monthly returns?

I have a dataset with monthly returns (In decimals) Jan-2008, Feb-2008 .... Dec-2008, Jan-2009 .... Dec-2017 This is what I have done, ...
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Excess Daily Returns to Excess Quarterly Returns

I am building a model which predicts the Excess Daily Returns over a time period. How do I convert these excess daily returns to excess quarterly returns? Should I just do an average of all the daily ...
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164 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 $\...
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Volatility of multimodal distribution of returns

Take $x_1, x_2, \ldots, x_T$ to be the price of a stock, indexed by $t=1, 2, \ldots, T$. Define rate of return at time $t>W$ for a window size of $W$ to be $$r_t = \frac{x_t - x_{t-W}}{x_{t-W}}$$ ...
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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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172 views

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,...
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109 views

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: ...
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143 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 ...
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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 ...

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