Rates and returns Flashcards
time/money weighted rr
Time-Weighted: Time-weighted rates of return do not take into account the impact of cash flows into and out of the portfolio.
Money-Weighted: Money-weighted rates of return do take into account the impact of cash flows into and out of the portfolio.
when more money will be invested in lower rate money weight will be smaller than time weight
Holding period return
Stopa zwrotu
Nominal return
Real rate + inflation or
(1+rr)(1i)-1
Geometric / arimetmic mean
- Geometric for mean rate of more than 1 period
arithmetic mean for only 1 period
2.Geometric always lower than arithmetic
Harmonic mean
N/suma(1/1+x)
1. Averaging costs (średnia cena akcji)
2. we use to minimalise wage of a big result
Ra*Rh=Rg^2
- most often used with rations ( amount/ unit np. p/e …) or when you buy stocks every period
Trimmed mean
Odejmujesz od wyników x% najwyższych i x % najniższych wyników ( x% trimmed)
Winsorised mean
To samo co trimmed tylko zastępuje się wartości graniczne tymi samymi wartościami (przykładowo pierwsze 8 to 1 i ostanie 8 to 8)
Money - weighted return
IRR lub YTM
What all my money earn but not what 1usd could earn
Time-weighted return
The growth of 1 USD over a given time
1. count the return for each period
2. make a geometrical mean for those
2.a if the returns are from less than a year we can do it without a (pierwiastek)
Rate
- Real risk free rate
- Inflation premium
- Default risk premium
- Liquidity premium
- Maturity premium
Geometric mean return
RG = -1+ ((1+R1)…(1+Rn))^1/t
t = number of periods
annualized RR
ra=((1+rp)^(n))-1
n liczba okresów w roku
continuously to period RR
rc=ln(Pt/P0)
(e^rc)-1 = rroczne
Lump-Sum
single payment
gross return
return before taking managerial expenses and tax (trade expenses are included)
what a fund earns
