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Basically the Total Return Index assumes reinvestments compared to "regular" indices. "A total return index is an index that measures the performance of a group of components by assuming that all cash distributions are reinvested, in addition to tracking the components' price movements.1 While it is common to refer to equity based indices, there ...


4

In the long run, you'd probably be better off learning a real programming language like Python, R, or MATLAB. While you can do this in Excel using mmult, transpose, and minverse, it's rather horrible. In any case, you should know about the mathematical idea of a matrix, matrix multiplication, and the inverse of a matrix. (Multiplying by the inverse of a ...


4

Two of the most cited papers are Sirri, E.R., Tufano, P., 1998. Costly Search and Mutual Fund Flows. Journal of Finance 53 (5). 1589–1622 and Chevalier, J., Ellison, G., 1997. Risk Taking by Mutual Funds as a Response to Incentives. Journal of Political Economy 105 (6). 1167–1200.


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Vanguard S&P 500 index fund tracks the index and not the total return because it pays dividends out to the owners of the fund... some investors reinvest the dividends, some investors spend their dividends, etc., so, because they cannot control the reinvestment and distribute the dividends, they benchmark against the S&P 500 index and not the total ...


3

To calculate the return of a mutual fund, you should use NAV prices. NAV prices represent the value of the fund divided by the outstanding number of shares. The NAV is calculated by the fund custodian bank, most commonly on a daily basis. If you call your bank and buy a fund, the usual way is that your bank buys it from the mutual fund company. You pay the ...


3

For Q1 in order to create a negative delta product you would have to offset it by selling a positive delta product to someone else, which is certainly possible. Q2 I agree with the proxy solution , but it is not very reliable since the fund manager can change the volatility of the fund by changing the composition of the assets. This cannot be avoided ...


3

Both questions are not as straightforward as @Hui (and most academics and practitioners) would immediately think. I would try to put in my two cents to answering your question 1. Short answer: It might have to do with the bias-variance tradeoff, as measuring the alpha precisely is a tricky task in small samples (and young funds do have short histories). ...


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I believe the exact answer to the question of what the S&P 500 price number assumes you do with the dividends is that you do NOT receive them at all. They are not included in the calculation AFAIK. So, yes, the price of one of the 500 companies drops a bit with a dividend payment (actually on the ex-dividend date), and the index drops a tiny bit because ...


2

In general, Absolute Return is from pure price appreciation, Total Return includes all related asset cashflows (dividends, coupons etc.) aswell. According to the ESMA document, it has nothing to do with that: A Total Return Fund is a fund with a return target to be achieved at smallest possible (but unbounded) risk, an Absolute Return Fund has a Risk (VaR) ...


2

That's a quite interesting problem, a few thoughts on how to attack it: Calculate the correlation and beta between the benchmark and the fund. If the above imply a link between these two then proceed with the betas' comparison. Regarding the three approaches you mention, the one which subtracts the betas sounds mathematically-speaking wrong since beta is a ...


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yahoo finance has a large set of historical data. it's available for free. There are a few libraries, to retrieve the data


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I think the only valid answer is you can't. The techniques you describe would work of the signal was much stronger than the noise but it seems that with your fund returns this is not the case. You could try to get more data or look at other risk measures like max drawdown to get some idea of the risks involved.


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The main reason in the academic literature for alphas to decrease with fund size has to do with decreasing returns to ability. Think about it this way: Managers first allocate funds to the most profitable opportunities; So the first dollars invested in fund have high returns (and so small funds perform well); As the fund size increases managers allocate ...


2

Most of this will be the sheer nature of statistics. Big funds tend to have more average results, small funds have more variance and thus have more of the high returns, but also likely more of the heavy losses. The same statistical effect is visible in the context of school performance : https://marginalrevolution.com/marginalrevolution/2010/09/the-small-...


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There is little chance that you find a single database that holds all the mutual funds in the world, especially for free. Some companies made a business out of this, such as Morningstar. They will also provide you with the prospectus, historical data when available, and other useful information. But obviously you'll have to pay for that.


1

I think it's more than likely just rounding. The prices only go out to two places past the decimal, so a 1 cent change would be about a 0.1% daily return (with a \$10 average price). Looking at the returns from a purely statistical standpoint, the average daily absolute return is \$-0.0062 with a standard deviation of \$0.042. If you assume a normal ...


1

Link to discussion in the other thread notwithstanding, calculating Sharpe ratio using arithmetic return is more 'classic' than using geometric return. To start, Sharpe himself used arithmetic returns in ex-post calculation in his originating paper (JPM, 1964). Most texts also use arithmetic return, among them Grinold and Kahn and Christopherson, Carino, ...


1

Q1: Correct. Q2: There are some variance / volatility swaps quoted in the IDB markets for major mutual funds. Some big hedge funds are also keen to sell volatility. Q3: Almost impossible. Q4: Calibration with historical volatility. Eventually with Avenalleda model (uncertain volatility) where you define a min/max vol Cheers


1

When we hear that the Dow is up for the day, it is not relative to the open, but rather to yesterday's close. Accordingly, I believe the yearly returns for 2013 are calculated, using the yearly adjusted closing prices, as $(C_{2013} - C_{2012}) / C_{2012}$. I looked up adjusted closing prices on finance.yahoo.com: substituting $C_{2012} = 20.96$ and $C_{...


1

Normally, alpha is the excess return beyond the benchmark, meaning if the benchmark return is 0, your portfolio will still have a return of alpha - the easiest way to understand. However, your second alpha, αi=Rit−RBMKt, is incorrectly addressing what alpha is, at least from most people's understanding. Could you provide any papers that use (αi=Rit−RBMKt) ? ...


1

I thought I'd contribute an answer that's more empirical and experience-based. I worked at an asset allocator earlier on in my career, and the company has a very strong bias toward NOT investing in large funds. Several reasons drive this bias: Performance Gap: Empirically, there is a measurable difference in returns between large funds and small funds – ...


1

Put your 100k in an account. Do not run any other strategy in the account. Run the account the same exact way you would run investor capital--same leverage, same risk parameters, same products, etc. You will need to be running the account continuously for a while. At least an amount of time that covers a few different market environments, a geopolitical ...


1

So you have calclulated the Sharpe-ratio (SR) for 100+ funds and find it suprising that the SR is positiv for so many. SR compares excess return to risk. As risk is always positive we can focus on excess return to analyze why so many of your funds have positive SR. To analyze this you have to go much more into detail: Which markets do these funds cover? ...


1

See this comment from the wiki page on fixed effects models: In statistics, a fixed effects model is a statistical model in which the model parameters are fixed ... Such models assist in controlling for unobserved heterogeneity when this heterogeneity is constant over time. Emphasis on the time constancy of unobserved heterogeneity is my own. Do you ...


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In general, more data is better than less data. On the topic of your specific scenario, you want to cluster by date or use some other procedure to produce consistent standard errors in the presence of cross-sectional correlation. Monthly returns are basically uncorrelated over time but exhibit significant cross-sectional correlation. With large quantities ...


1

I would like pile on with the recommendations for using activeshare.info. However, active share data is only available for mutual funds, so the use cases are limited. As your question title implies, "detecting" a managers active bets is a function of differentiating them from passive bets. From Investopedia entry on 13-F "Alpha Cloning": Portfolio ...


1

MorningStar or Lipper will be your best bets if you want everything in a nice machine readable format. factset/etf.com or etfdb are great sources for etf data. If you want to go through the web, you can try etf.com or etfdb.com for the ETFs and morningstar.com for the mutual funds.


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Micro finance did not work in certain parts of South Africa. That's not surprising. Neither this, nor anything else is a "panacea" (cure-all) for various financial problems. Micro finance apparently works in SOME parts of the world (India, Bangladesh, etc.), where the ethos and institutional framework make it viable. It may work better with women (who have ...


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For hedge funds, the main factors that drive capital flows are (not sure about actual research papers) ... Risk-adjusted performance (over prior 4-6 years) is very strongly correlated to capital flows and by far the most dominant factor. Absolute return is mostly ignored, unless the absolute return is very low (i.e. sub 5%) and similarly leverage is mostly ...


1

Funds that pay dividends hold each companies dividend until the end of the quarter and pay it as a lump sum. Until this is done the fund has lost no value. But when paid drops the value of the payment. You must remember they are continually taking fees out of this amount.


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