[R-sig-finance] Fund ratios with lagged correlations

Enrique Bengoechea enrique.bengoechea at credit-suisse.com
Thu Mar 9 15:43:30 CET 2006

Hi, I'm having a problem computing funds ratios such as alpha, beta, tracking error, etc, and maybe the list wisdom can be of help  :-)

I have daily NAVs and values of luxembourg funds and their benchmarks. Most funds investing in the US have a delay on its NAV of 1 day with respect to benchmarks such as S&P500. I find this easily using the ccf function, and then I just compute the ratios
of the delayed (returns of the) NAVs with respect to (returns of) the benchmark.

The problem is that with some markets (e.g. south american funds) the correlation between the fund and its benchmarks is splitted between the current day and the previous day. I find this by testing that none of the series exhibits significant serial
autocorrelation, but the cross-correlations are high for both the 0 and 1 lag (say 0.5 and 0.5, or 0.7 and 0.4). With products that trade continuously I can solve this problem by taking into account timezones and using prices at specific times of the day,
but with funds and many indexes only end-of-day values are available.

Has someone faced this problem? How do you adapt the beta/correlation/etc computations to handle this issue and come up with sensible estimates? Any paper dealing with this topic?

Thanks in advance!!!


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