Other Tutorials and Notes

Number of Trading Days per Year

In option pricing, volatility modeling, and quantitative finance in general, you often need the number of trading days per year as a parameter for your model. Which number to choose? Trading Days per Year in US Markets How many trading days per year are there in the US stock and [more…]

Excel Reverse Date Problem and How to Fix It

When you work with time series in Excel and import data from sources which use different date format than your operating system, Excel sometimes loads the dates incorrectly. It may swap day and month or not recognize the expression as date and treat it as text. The first solution to [more…]

How to Download Historical Data from Yahoo Finance

This page is a detailed guide to finding and downloading historical data such as daily stock prices or index values from Yahoo Finance. Go to Yahoo Finance homepage: finance.yahoo.com At the moment and on my computer it looks like this. It may look a little different on your device, but [more…]

Sharpe Ratio

Sharpe Ratio Formula, Values, and Interpretation Sharpe Ratio Formula Here you can see detailed explanation of the formula. Sharpe Ratio Value Range Sharpe ratio can theoretically reach any value – positive, negative, or zero. Here you can find more detailed explanation: Sharpe Ratio Range. Here you can find the interpretation [more…]

Alternative Investments

Alternative Investments Characteristics and Issues Characteristics 7 Common Characteristics of Alternative Investments – The common characteristics are: diversity (there are many kinds of alternative investments), non-normal and non-linear returns (especially skewness of returns), low liquidity, difficult valuation, limited availability of good benchmarks, legal restrictions and limited availability of alternative investments [more…]

Weighted Average Cost of Capital (WACC)

Weighted Average Cost of Capital Definition Weighted Average Cost of Capital, also known by the acronym WACC, is the average cost of capital (financing) of a firm calculated as weighted arithmetic mean of all components of its capital. Components of a firm’s capital include particularly the following: common equity, preferred [more…]

Value At Risk (VAR) Limitations and Disadvantages

Value At Risk is a widely used risk management tool, popular especially with banks and big financial institutions. There are valid reasons for its popularity – using VAR has several advantages. But for using Value At Risk for effective risk management without unwillingly encouraging a future financial disaster, it is [more…]

Hedge Fund Trading Styles Overview

Why Classify Hedge Funds into Styles? Classifying hedge fund trading styles into groups is good for: Choosing the right funds to invest in. Some trading styles are entirely unsuitable for a particular investor’s risk and return objectives and by knowing the basic characteristics of hedge fund styles the investor can [more…]

SEC 13F: How to Get & Use 13F Filings

There is a place on the internet where you can get a detailed portfolio snapshot from the world’s greatest traders, fund managers, and investors – regularly and for free. The place is US SEC (Securities and Exchange Commission). SEC 13F Holdings Report and US Securities Exchange Act According to Section [more…]

Value Weighted Stock Index: Construction, Problems, and Adjustments

Value weighted indices: one of the 3 index construction methods Value weighting (also known as market cap weighting or capitalization weighting) is one of the three commonly used methods for stock index calculation (the other two methods are price weighting and equal weighting). Value weighted stock indices are currently the [more…]

Price Weighted Stock Index Calculation and Biases

Equity index weighting methods Stock indices perform important functions in the global investing universe. They serve as benchmarks of equity markets and therefore as good indicators of economic situation and investor sentiment. Stock indices are widely used in analyses and investment decision making. There are three common methods of stock [more…]