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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100 views

The use of volatility from log returns and raw return

As far as I know, we usually use log returns( $ln\frac{p_{t+1}}{p_{t}}$ ) in quantitative finance. For example, let's say we have lots of monthly log returns data, $R_m$. Then, we can get the mean ...
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57 views

The ratio of upside deviation to downside deviation in portfolio weighting

I've been calling this ratio "acceleration" in my head, so I'll do the same in this post. The question is, is this relationship used anywhere and if so, how? My thought process is as follows. Risk ...
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61 views

Optimize risk return of portfolio

I have gathered stock prices from 15 companies over a year. I calculated the averages, yearly volatilizes, and the correlation matrix. I was asked to find the optimum weight for each stock with a ...
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277 views

Value-weighted return: which date should the market-capitalization be based on?

I got a short question regarding calculating the value-weighted return of portfolios. Example: The portfolio is constructed based on the value of a certain criteria on date 31.1 (Jan 31st). The ...
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568 views

Squared returns and volatility

Squared returns are considered pillars of GARCH/ARCH modelling and most used method for forecasting or studying volatility. Can you tell me how to calculate it from simple stock price. Is it better ...
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75 views

Portfolio return with changing assets over time

I need some feedback on a very basic question regarding the calculation of the portfolio return. I have created an example of a portfolio with two assets and attempted to calculate the return: I've ...
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1answer
168 views

Should the sum of daily returns be close to monthly returns

I am calculating value-weighted returns with monthly dividends reinvested and for some reason when I sum the daily returns some are a little bit off with monthly returns. Is this normal?
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624 views

Creating value weighted portfolio returns. How to handle missing data?

I am creating portfolios using stock data. I have some missing data for certain months. What is the best way to handle this? Should I treat missing months as a return of zero? I want to try and ...
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266 views

Daily returns to monthly basic question [closed]

I am currently a little bit puzzled. I am trying to compute the monthly returns from a set of data. ...
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121 views

Calculating Compound Annualized Rate of Return (Negative Mantissa)

According to Kaufman (Trading Systems and Methods, 2013), the compound annualized rate of return is calculated as follows: $$\mathrm{AROR}_\mathrm{compound} = \left[ \left( \frac{\mathrm{Final ...
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93 views

How to Calculate Stock Return with Stock Bonuses and Rights?

I would appreciate if you could let me know how to calculate stock return for a given company when the company issued bonus shares and rights. If company just paid dividends, stock return would be: ...
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Portfolio return through beta [closed]

Considering the beta value of the three assets in my portfolio simulation and the weights of the assets, i have computed the beta of the portfolio itself. How can i calculate the expected return of ...
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Why do Fama French's “Common risk factors in the returns on stocks and bonds” use data starting in 1963? Availability or convenience for results?

What is the reason Fama French's "Common risk factors in the returns on stocks and bonds" use data starting in 1963? Was it availability or convenience for results?
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Should the valuation decision of the following question be undervalued or overvalued?

The official solution to this question is B, but I don't understand that if the recommendation is given by the CAPM model, then the CAPM estimated return should be regarded as "fair" and benchmark for ...
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716 views

Cumulative portfolio returns vs. product of cumulative asset returns

I wasn't able to find something that addressed this specifically with the search terms I was using, though I am sure an answer exists here. [Please reference the image below] Columns B & C are ...
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230 views

Getting Returns from Local Currency to USD

I want to get the daily returns in USD given returns in local currency (say Japanese Yen). Say for example, on February 3rd according to Factset, the returns of Inpex Corp (Japan) are: In USD: 0....
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Adjusting a daily log return for a cash inflow/outflow [closed]

If I had a portfolio with one stock with an initial value of 100 and the next day the stock gained 5 and I added 50 too, would I adjust the log return this way: ln [(155-50)/100]?
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Calculating annualized volatility of stock returns

Suppose I have a sequence of monthly returns of a stock, $r_1,r_2,\ldots$. Suppose further that this is an i.i.d. sequence with with finite second moments. In every paper, report, lecture note etc. ...
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130 views

How to calculate daily return including fees?

I have a trading strategy that closes one position on an asset and open a new position on a different asset every day at noon. No more than one position is open at a single time. Assets are crypto ...
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2answers
76 views

Portfolio Theory: Must VarCovar Matrix be based on return var/covar?

I am trying to estimate the minimum variance portfolio where the assets are currency derivatives. In the specific case it does not make sense to base correlations or variance on asset returns. I am ...
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1answer
51 views

Which rate of return to use in portfolio weight estimation?

I am learning the basics of portfolio management. I am confused about different ways to calculate rate of returns mentioned in the text investment and portfolio analysis. There are three methods to ...
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1answer
71 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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85 views

Portfolio return for assets held for different lengths of time

How does one calculate the return on a portfolio if the assets in that portfolio were held for varying periods of time? For Example: $t_0$ Buy AAPL at 100 $t_5$ Buy MSFT at 20 $t_1$$_0$ Sell MSFT at ...
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443 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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97 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])
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What does 2 Year Annualized mean compared to 1 Year Annualized

I am looking at a company's financial report and there is a table in it that lists returns over different annualized periods. It ranges from 1 year to 20 years. Would a 2 year return in this table be ...
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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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36 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 ...
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1answer
17 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 ...
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27 views

Mutual fund performance overtime

I am a little bit stuck with my dissertation thesis, so help will be greatly appreciated. I am trying to analyze the performance of different mutual funds, which I have classified according to ...
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How to simulate the cross-section

I am looking to simulate the whole cross-section of daily return series for 20 to 60 days. The purpose is to test some risk measures based no maximum drawdown. Thus, it needs the whole time series. ...
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79 views

Optimal predictors for 1-month returns

I am implementing a Random Forest classifier algorithm on Python for predicting future stock returns (one month). My goal is to foresee whether the cumulative returns in a month will be negative or ...
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20 views

PanelOLS or simple OLS?

It is probably a silly question but please assume the following. I gather hedge funds returns and I want to do a regression against few dependent variables (FF factors, etc.). In essence, I get a ...
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21 views

Fama Foundations of Finance today

Which could be a recent equivalent of Fama's book Foundations of Finance? By "equivalent" I mean a book which is rigorous, but without being a book on stochastic calculus; which is focused on stock ...
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55 views

Correct calculation of returns from a pairs trade

I am trying to understand how pairs trading works but I am confused about how to go about calculating the return on the pairs trade when I reverse my positions. I have been reading 'Pairs Trading - ...
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29 views

Stock returns: Exponential time decay

I am replicating some research that uses two years of single stock returns (i.e. N= 250*2= 500) and then applies an exponential decay with a half-life of one year to these returns. Does this mean ...
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20 views

is it possible to have a leverage ratio of less than 1?

I know you can leverage to be greater than 1, but is it possible to have less than 1? Like 0.5 for example? So that this scenario could be realized? ...
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How can I find the exit equity value from my dataset (please read description and see screenshot below)

I am investigating the returns of private equity using a public market equivalent (PME) and have been given a dataset from the that has provided us with the deal level IRR, the entry equity data and ...
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41 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-...
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31 views

calculating sharpe-ratio and annualized returns

Im trying to get the sharpe ratio to be calculated daily but I can only calculate it annually, this is also happening for my annualized returns, can somebody help me please? ...
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1answer
46 views

pair 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 ...
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44 views

How to Calculate Discrete Currency Returns for Short Positions

I need to calculate currency returns for 1) short selling the currency and 2) going long in the currency. When going long, the currency is sold at Forward price $F_t$ and bought at spot price $S_{t+1}$...
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1answer
73 views

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 ...
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3answers
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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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72 views

Modern Linking Algorithm for Multi Period Performance Attribution

I'm looking for a modern description of the linking algorithms used in industry arithmetic performance attribution across multiple periods. Since the sum of the active return components in arithmetic ...
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18 views

Error distribution algorithms in performance attribution

Are there any known & generally accepted methods of scaling each return in a period such that the total cumulative return equals a more desired amount? For example, 0.5 and 0.3 have a total ...
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74 views

What is the difference between Rolling Returns and Moving Average and how to calculate them?

So I understand what a moving average is and how to calculate it. I'm using this numpy function for it. I am somehow confused about how to calculate rolling returns. Different sites explain it ...
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41 views

Why do these Monthly vs. daily plots differ?

I got my data from Thomson Reuters Datastream. As an Input for my plot i calculated daily Returns based on the Return-Index provided by datastream. Then i plotted the Monthly and the daily Returns.(...
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302 views

How to calculate annualized simple returns and annualized simple standard deviation given historical daily data

I have daily log returns of my asset that run over several years and I would like to calculate a time series of the Rolling Sharpe Ratio. This Sharpe Ratio asks specifically for: Annualized simple ...
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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 ...

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