# 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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### Overnight and intraday returns of stock index and ETF seem inconsistent

Figure 2 of the 2019 paper "Celebrating Three Decades of Worldwide Stock Market Manipulation" shows that 29 Jan 1993 to 31 Oct 2019, overnight returns (from close to open) of SPY were 1232% while ...
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### Time and asset weighted rate of return of a portfolio

If I have a portfolio with 3 initial assets on day 1 (say, stock 1 with beginning market value of \$100, stock 2 \$150 and stock 3 \$175) and after 10 days the stock 2 is sold for \$200, how can I ...
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### Bloomberg Treasuries PX_Last and daily returns

I tried to search for this specific question, although I didn’t found a conclusive answer. I have a dataset containing the yields of several T-Bills and T-Notes that were downloaded from a Bloomberg ...
1 vote
430 views

### Relationship between ROE and IRR

In the textbook I read the following: We can increase the present value of a share of common stock with a new investment only if $ROE > r$ , where $r$ is a discount rate (capitalization rate). ...
1 vote
86 views

### Autocorrelation in daily bond returns

I've been examining the returns of a few government bond series around the world. I found out that some have a positive daily autocorrelation. It's not big, but still seems at odds with efficiency. ...
1 vote
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### 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 ...
1 vote
26 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 ...
1 vote
85 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 ...
1 vote
42 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 ...
1 vote
29 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 ...
1 vote
202 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 ...
1 vote
162 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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57 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 ...
1 vote
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### 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 ...
1 vote
68 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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### 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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### 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%...
1 vote
108 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 ...
1 vote
83 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 $X_t$ ...
1 vote
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: ...
35 views

### Estimating Returns with the Non-Central t-distribution

The Boost C++ Libraries provide a set of statistical distributions in their Math Toolkit library. The best candidate I can find among those available that will capture skew and kurtosis typically ...
25 views

### Is there a formal notion of a "reward measure"?

A risk measure, as defined in the Wikipedia page, is a function that maps random variables to real numbers and satisfies the normalized, translative, and monotone properties. There are many other ...
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### Intraday tick volatility between a time interval

I would like to calculate intraday tick volatility between a time interval A to B. E.g. If I have the quote and trade ticks for an instrument between 2023-02-17 10:00:02 to 2023-02-17 14:30:00, would ...
47 views

### Bias-Variance tradeoff for Covariance Estimation w/ Different Frequencies

In general, what does the bias-variance tradeoff look like when estimating covariance matrices with varying return frequencies (i.e. daily, weekly, monthly returns)? From my observations I've noticed ...
29 views

### Taking into account of transaction cost and initial margin into calculation of Returns and Sharpe Ratio

As a follow up question to this question How to take into account of transaction cost in return and Sharpe Ratio? I am thinking that if I need to take into account of transaction cost, and suppose I ...
47 views

### How to calculate Quartile (or Decile) returns

I have split the following portfolio of 20 stocks into 4 quartiles by say market cap. My main question is how would you ...
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### Equity and Credit Portfolio Return

This might sound like a trivial question but would appreciate the answer. How would you calculate the return of the portfolio consisting of only equity and credit instruments? For example, consider ...
129 views

### combining forecasts at different time horizons

I define a prediction of return of an asset as the following: at time $t=0$, I use my data and output that I expect the asset to make the following returns (in expected value) in the next n intervals \$...
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### How to calculate the portfolio risk and return if daily share prices, volume held on that day is given for all assets?

The problem is with the changing volume of assets which changes the weights. I want to use the formula for portfolio risk but cannot figure out the weights. Should taking average weight of an asset ...
88 views

### Correlation between CDS return relevance

I see that there is much literature that uses the correlation notion in the equity returns to construct a graph or look into how they are related to one another. If we want to extend this to Credit ...
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### I.I.D log returns. What about their square?

If one assumes the underlying return process is I.I.D, is there a solution to the question of the autocorrelation of squared returns? Thanks.
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### Theoretical returns are not matching empirical ones in my backtest

I'm trying to implement a Backtest for my quant strategy but the calculated theoretical returns are not matching the returns from my implementation. Here's the example: On a given day I have 1 million ...
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### Correct return calculation if short position involved

I wanted to calculate the daily return for a long-short position. Say one has 1 unit of stock A (long) and alpha units of stock B short. How can one now calculate correctly the daily percentage return?...
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### Performance Attribution and FX positions

I'm currently reading the book "Mastering Attribution" from Andrew Colin. He first explains that you can separate the FX returns from the security return if the returns are continous ...
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### What is higher order moment of firms?

Today I read a sentence that "in US, expected market excess returns can be predicted using average higher order moments of all firms". When I read further, "higher order moments" ...
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### What's the best proxy for a stock contribution to the portfolio returns?

I have a table of the weights of stocks in my portfolio for various periods and another with the returns that those stocks had for the same periods. If I sum the product between the weights and the ...
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### Calculation of Long-Short-Portfolio returns for different holding periods

I have monthly stock returns I want to invest in according to my trading signals. Now I want to figure out the optimal holding period of the long-short-positions. (The same time for both positions). I ...