[R-SIG-Finance] Calculating returns on negative time series

[Patrick Burns]

The post:
http://www.portfolioprobe.com/2010/10/04/a-tale-of-two-returns/
may or may not answer your question.

If it does answer your question, then I suspect
you are using negative values to mean "short".
Correct?

If it does not answer your question, then can you
explain the negative part more thoroughly please?

On 27/10/2010 16:54, Johnson, Cedrick W. wrote:
> Howdy-
>
> I *know* I've seen it discussed before on the list, and I've tried to
> search through all my emails and the archives for it so forgive me for
> reposting (perhaps I'm using the improper search terms).
>
> To calculate the simple returns for a time series above 0, no brainer:
>
> I'm using the Return.calculate function to calculate these
> (method="simple")
>
> Things get a little tricky when I throw in time series that are negative
> (such as spreads):
>
> x =
> c(-117,-122,-129,-129,-134,-136,-136,-140,-143,-143,-143.2,-146.7,-145.8,-143,-141.2,-137.7,-135.5,-133.6)
>
>
> NaN's are produced when trying to get a "return" time series. I seem to
> recall doing this
>
> xa = abs(x)
> Return.calculate(xa)
>
> 2 0.041847110
> 3 0.055791360
> 4 0.000000000
> 5 0.038027396
> 6 0.014815086
> 7 0.000000000
> 8 0.028987537
> 9 0.021202208
> 10 0.000000000
> 11 0.001397624
> 12 0.024147431
> 13 -0.006153866
> 14 -0.019391189
> 15 -0.012667305
> 16 -0.025099919
> 17 -0.016105765
> 18 -0.014121379
>
> I am thinking that I could take the abs value, once I get the return
> series just invert it by multiplying by -1. I'm concerned that something
> could be thrown off by a series that's changing from lets say 1,0,-1
> (puking on the 0).
>
> Can someone point me to anything that addresses this? Not sure the
> "solution" i outlined above is the proper way to handle this.
>
> -c
>
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-- 
Patrick Burns
patrick at burns-stat.com
http://www.burns-stat.com
http://www.portfolioprobe.com/blog