This paper presents formulae for the long term annualized period return, expected annualized period return, and variance of annualized period return for two popular option strategies. The two strategies are stock plus put (portfolio insurance) and stock minus call (covered write). Various...

Many investors fear mathematics and most know little of it. Perhaps this is because mathematics often is presented too briefly and in a confusing manner. Fortunately, it is not necessary for investors to learn mathematics in order to use it effectively. Well-designed computer programs makes it...

Positive risk-adjusted return of the winner group is found when adjusted-MVA is designated as the ranking variable. This return is higher than the one in the loser group. However, both returns are at insignificant level. The p-values for each factor loading, and the F-values are all significant...

A few security analysts engaged in quantitative analysis long before computers became readily available. This study presents an example dating from 1972. An analyst examined the fixed cost-variable cost structure of General Motors by creating a nonlinear algebraic model, transforming the model...

It is often argued in defense of Risk Parity portfolios that they maximize the Sharpe ratio if their securities have identical Sharpe ratios and identical correlations. However, securities have neither identical Sharpe ratios nor this correlation structure. In realistic markets, Risk Parity...

Wall Streeters know that performance varies from one time interval to another, that there are a semi-infinite number of time intervals, and that there are always many such periods with plausibly good performance. Wall Streeters also know that various computations of performance give different...

An efficient market is thought to be desirable by many legislators, regulators, and academicians. At the same time, they seem adamant that the investment industry unbundle. These two positions are at odds unless it is proposed that investment research be subsidized. Regulators who insist on...

Perhaps the most frequently used estimator of the Capital Asset Pricing Model beta in finance is the Ordinary Least Squares estimate, obtained by regressing excess security return against excess market return, with an intercept. This paper shows that the Ordinary Least Squares estimator is...

This paper proposes that, and explains why, hedge profits and regression approach hedge ratios should be calculated using cost-of-carry-adjusted price changes. This Modified Regression Method for determining hedge ratios is denoted MRM. The paper discusses the Error-Correction Model for hedge...

The arithmetic mean-variance efficient frontier shows that taking more risk is always rewarded with higher expected arithmetic return. However, expected arithmetic return is a poor indicator of long-term arithmetic return, which corresponds to expected continuous return. For the continuous...