1-7. Stock Returns

Let’s talk about how a series of daily price values arises. It has to do with our earlier discussion of compounding. Let’s say, a stock starts at P sub zero, and each day the price changes by some small percent, the return. We saw earlier how the price at time T could be written as … Read more

Quantitative analysts frequently work with a quantity related to but slightly different from the raw return, the natural logarithm of return. Remember how the return was defined as P sub t minus P sub t minus one divided by P sub t minus 1. Well, the log return is defined slightly differently, as the natural … Read more

Say we’re looking at a time series of prices for a stock. The ups and downs are interesting if we’re vaguely curious about how the company is doing. But more likely than not, we’re looking at the price series because we own some of the stock or we’ve invested money in the stock on someone … Read more

So far, you’ve seen some stock market data and learned about some of the market processes that generate these data, so you’re beginning to see what these long streams of numbers actually mean. As is true of all types of data, stock data represent measurements of things in the real world that have certain properties, … Read more