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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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1answer
36 views

Compute the risk measured by the standard deviations $\sigma K_1, \sigma K_2, \sigma K_3$, does this have to do with weights?

Compute the risk measured by the standard deviations $\sigma K_1, \sigma K_2, \sigma K_3$ for each of the investment projects, where the returns $K_1, K_2$, and $K_3$ depend on the market scenario: $$...
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2answers
401 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 ...
2
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1answer
1k views

Drivers of equity returns: dividend yield, change in P/E and dividend (or earnings) growth

In an NBIM paper I read the following: "... one can break down the total equity return into the dividend yield (the starting valuation), the change in the P/E ratio (the change in valuation) ...
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1answer
64 views

How to calculate 5 years return & STD for ETF?

I want to calculate by-myself 5 year return & STD for SPY ETF. What I did: Downloaded to Excel from yahoo finance historical data for the ETF (daily Adj. Close) from ...
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3answers
2k views

Computing Pooled IRR from the IRRs of parts

Suppose I have two cash flows: CF1: -10001001001100 CF2: -20020301 I can compute now: IRR(CF1) = 10% IRR(CF2) =-55% IRR(CF1+CF2) = 4.46% Is there a way to compute (or at least get a fair estimate) ...
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0answers
94 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
456 views

VaR interpretation for positive returns

I used Extreme Value Theory to separate extreme negative returns from extreme positive returns, then, I calculated the VaR for both. I need to know what could be the interpretation of VaR for ...
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1answer
9k views

How to calculate annualised tracking error?

I have 36 months of relative returns and I need to calculate the annualised tracking error. So, using 36 months of returns is it simply like below: ...
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3answers
596 views

Interpretation of t-test in event study with dummy regression

I am not sure about my interpretation of the t-ratios in dummy regression models for event studies. I have the results for two different groups of models examining the impact of news on stock returns ...
2
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1answer
815 views

Sharpe Ratio versus Cumulative Returns

I was asked whether Sharpe Ratio was a better measure than Cumulative Returns, in the context of hedge funds. To me, personally, Sharpe Ratio is a more important measure. By definition, it tells us ...
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2answers
1k views

Annualized Sharpe Ratio calculation

I'm trying to replicate the annualized Sharpe ratio of an buy-and-hold strategy for the Dow Jones Industrial Average index for a period consisting of multiple years. I got the daily DJIA (closing) ...
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1answer
457 views

Differences between dummy regression event study and regression on residuals from market model

I have two different event study approaches and I wonder if the results are exactly the same. Model 1 applies a dummy regression market model: (1) $R_{t}=\beta_{0} + \beta_{1}R_{mt}+\beta_{2}D_{t}+\...
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2answers
7k views

Calculating log-returns across multiple securities and time

I've been getting very confused on the topic of calculating returns. To get cumulative returns in time, log-returns are used, but apparently log-returns aren't used across different securities at a ...
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4answers
501 views

How to interpret regression coefficients with dummy explanatory variables?

I am a bit confused about the interpretation of the regression coefficients in a regression model: $R_{t}=\beta_0+\beta_1R_{mt}+\beta_2D_{t}+\epsilon_t$ where $R_{t}$ is the log return of some stock,...
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1answer
679 views

How to compute returns and daily VaR of a currency position?

I have a Forex trading account with a base currency USD. I am holding a position in EUR/JPY and would like to estimate my daily VaR. If I compute the EUR/JPY returns using the historic prices this ...
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1answer
51 views

Testing day of the week effect

I am currently reading a bit about testing day of the weeks effects. I saw two different model specifications and wonder how to interpret the results. The first model type includes only 4 dummies for ...
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1answer
58 views

Adjust regression for thin trading

What procedures can I apply to control in a regression on company returns for thinly traded stocks? Is the inclusion of the SMB-factor a potential approach? Or just a dummy variable indicating if a ...
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1answer
140 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 ...
2
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1answer
189 views

Multiperiod return formulae with dividends

I have a question about returns when dividends are 'paid'. Firstly, will write down some definitions: Let $P_t$ be the price of an asset at time t. Assuming no dividends the net return over the ...
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1answer
632 views

How to calculate returns and sharpe ratio for futures?

What is the industry standard way to calculate returns, which will be used to calculate sharpe ratio for e-mini S&P500?
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1answer
262 views

What P&L netting should one use when a strategy has trades in two different geographic locations?

I am familiar with the FIFO methodology of netting buys and sells to obtain a realized P&L and outstanding position. Suppose there's a strategy which runs in two different places A, and B and ...
2
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2answers
400 views

Portfolio Return Contribution by Sectors

I have a table containing the following fields: Date, PortfolioReturn, CashReturn, Sector1Return,...,Sector10Returns 'PortfolioReturn' is the sum of CashReturn + return contributed from 10 market ...
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1answer
63 views

Determining significant difference between to return series

I want to analyse whether two return series are different. I was told to run the following regression: ...
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1answer
373 views

What is the logic behind this backtesting code in R

I am new to R and I have found this simple backtesting code and can you explain me what is happening here. ...
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1answer
379 views

Pair trading based on cointegration - equity line

I'm preparing a project at my Uni where I have to make a simple pair trading strategy using cointegration between two stocks. I'm stuck on the equity line calculation. I have prepared opening and ...
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3answers
331 views

Can Gaussianity of returns depend on the time frame?

I would be interested in knowing if the fact that returns are Gaussian is disproved on all time frames, or if, for example, the 5 minute intra-day time frame could exhibits Gaussian returns assuming ...
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2answers
354 views

Comparing Returns on a Sector Basis

I'd like to compare the returns of a portfolio segregated by groups to the returns of those groups in total. So say for example I have a portfolio with 40% Industrials and 60% Technology, then over ...
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3answers
2k views

Using rolling returns in a multivariate linear regression?

I am trying to use fundamental factors such as PE, BV, & CFO in a multivariate linear regression with the response variable being the rolling 1 month returns. But this approach seems flawed as the ...
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1answer
206 views

How to deal with missing returns when creating value (equal) weighted returns

recently I am doing cross sectional regressions, and getting confused about missing returns. Suppose we have 100 stocks, then we want to construct a value weighted return (or equal weighted return). ...
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2answers
115 views

Does heteroskedasticity of returns depend on the time frame?

Similarly to my last question, for which I obtained very interesting and useful answers, I would like to know if there has been any study regarding heteroskedasticity and time-frames of the returns. ...
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3answers
2k views

How to model the daily return using intraday data?

Say, I have hourly returns $r_1,r_2,...,r_T$, where $r_t$ = $ln(p_t)$ - $ln(p_0)$ for $t = 1...T$. So what is the value of $E[r_t]$? Would $r_T$ be the $\prod{(r_t)}$? Basically $r_t$s are the ...
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1answer
26 views

Calculating the rate of return over a year then the data for a year before does not exist

I am trying to find the growth rate of a stock over a given year. Let's say I wanted to find the growth rate from today, June 11, 2015 to June 11, 2014. This is easy enough when you have perfect ...
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1answer
411 views

Apply CAPM using returns on a foreign currency as the market returns

I want to analize Bitcoin returns using the CAPM. I was thinking if it makes sense to compare returns of (BTC/USD) against (EUR/USD), taking the latter as the market returns. However, since EUR is ...
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1answer
25 views

Measure difference between estimations and historic returns

For every day in a year, I have the return on an asset and the CAPM estimation for the return. I want to measure the average difference between the set of returns and set of estimations. So far, I ...
2
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1answer
171 views

importing columns of returns data into python from excel/csv [closed]

I'm fairly new to the quant finance space, and I was hoping to get some guidance. Say I have a csv/excel file with columns of daily returns data for various asset classes or securities (one column per ...
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2answers
93 views

returns of Bonds and exchange rates

which are the best distributions in order to model the bonds and exchange rate returns distributions. I am searching for a distribution such as the log-normal one of the stocks ( N(m-0.5*v),Sqrt[v])
3
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1answer
275 views

What is the relationship between arithmetic versus geometric averages and simple versus logarithmic prices?

I know that the geometric mean is used in order to make percentage returns across time comparable. Similarly, I know that log prices make percentage returns comparable for example when prices are ...
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2answers
1k views

Volatility of a rolling window strategy

What methods can be applied to determine the volatility of strategy using a rolling window? Using normal standard deviation would bias the results as the returns will be highly correlated. Although, ...
3
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1answer
2k views

How to estimate market integration parameter in Singer-Terhaar model for E(r)?

Singer-Terhaar is part of CFA II and III curriculum. It estimates risk premium for some asset, traded at some local market, as weighted average of expected premiums for the case of (1) local market, ...
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0answers
122 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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0answers
94 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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2answers
659 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 ...
3
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1answer
218 views

On an application of Ito's lemma

Assume that instantaneous returns are generated by the continuous time martingale: $$dp_t = \sigma_t dW_t$$ where $W_t$ denotes a standard Weiner process and One day returns are denoted by $r_{t+1} =...
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1answer
172 views

Exponential weighting of returns

I am looking for a procedure to compute an exponential weighting of returns given a half life parameter. I ran accross a wikipedia article, can I take it unchanged an assume N(t) is the return at ...
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1answer
641 views

De-annualizing a target alpha return

apologies if this is not the correct place for this type of question, but I just want to confirm if the following de-annualization is correct. if a manager states that he will earn 200 bps of target ...
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3answers
9k views

Why do we usually model returns and not prices?

I think this is a quite similar question for most of you, however it is not completely understandable for me at the moment: Why do we usually use returns and not prices to model financial data in ...
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1answer
92 views

Geometric Returns values less than -100%

I am trying to find the geometric return for semi-annual log-returns in Excel. However, I do not know how to handle values less than -100%.... ...
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1answer
679 views

Comparing the return of different roll strategies

I am interested in calculating the effect of the roll return using different roll strategies. In specific I want to mimic a long-only futures investments. I have historical data for several ...
2
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1answer
903 views

Log returns and GARCH models

I try to model currency rates volatility using GARCH models through the RUGARCH package in R. Starting from the observed currency rate series, I compute the log-return through: ...
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2answers
100 views

Using central limit theorem to test whether population average return is the same, before and after the recession

This is the task I have been asked to do. I've read up on what central limit theorem (clt) is, but I feel like I'm missing something. The data I have is a matrix of monthly stock returns from 50 ...