Why do many MATLAB examples model stock price returns instead of absolute changes?
2 次查看(过去 30 天)
显示 更早的评论
Many MATLAB examples about fitting ARIMA models use price2ret to transform a stock time series to a return time series and then apply the estimate function to fit an ARIMA model. Why are price returns fit instead of absolute price changes?
0 个评论
采纳的回答
Rick Rosson
2014-9-28
编辑:Rick Rosson
2014-9-28
Suppose you own a portfolio containing two stocks, with a total value of $5,000 each. Suppose further that the price of one stock rose yesterday by $5.00 per share, while the other one rose by $3.00 per share. Which stock contributed more money to your portfolio as a result of yesterday's market changes?
The question is impossible to answer without knowing either the number of shares of each company you hold, or the initial price per share of each stock.
If, on the other hand, I had told you that the first stock rose by 2 percent while the second rose by 4 percent, you would have known immediately that the second stock had performed better and had contributed more of a net increase in value to your portfolio than had the first stock.
Absolute changes in per share stock prices are meaningless. The change in price relative to the initial price -- in other words, the percentage rate of return -- is what actually matters.
3 个评论
Rick Rosson
2014-9-29
Yes, all valid reasons. In fact, if you ensure that the percentage rate of return is always greater than -100 percent, then the price of the stock will never go negative. And this requirement is independent of the current price of the stock.
Rick Rosson
2014-9-29
One other thing to keep in mind: when computing the percentage rate of return, don't forget to include any cash dividends that the company pays in the total return. You should include the cash dividends on the so-called "ex-dividend" date, not on the announcement date or the payment date.
更多回答(0 个)
另请参阅
类别
在 Help Center 和 File Exchange 中查找有关 Conditional Mean Models 的更多信息
Community Treasure Hunt
Find the treasures in MATLAB Central and discover how the community can help you!
Start Hunting!