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

[Patrick Burns]

Okay.  The thing about returns is that
they are about *money*.  The return
over a period of time is a function of
two values:
* the amount of money to buy
* the amount of money to sell

I don't think that is what you have in
your data.

On 27/10/2010 17:51, Johnson, Cedrick W. wrote:
> I'll look into the materials at the post in more detail shortly, much
> appreciated.
>
> On the series, I could either be long or short. Meaning:
>
> "long" at -117, if it jumps to -122 i've lost -5. Conversely, "short"
> -117 and it jumps to -122 +5.
>
> I hope I explained it well, as I said i'll check the link and do some
> more digging.
>
> regards,
> c
>
> On 10/27/2010 12:38 PM, Patrick Burns wrote:
>> 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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>>> should go.
>>>
>>
>
>

-- 
Patrick Burns
patrick at burns-stat.com
http://www.burns-stat.com
http://www.portfolioprobe.com/blog