WebCab Portfolio for COM v5.0 Demo

PerformanceEvaluation.PortfolioReturn Method 

Evaluates the real or expected return of a portfolio of assets over a given period.

public double PortfolioReturn(
   double[] weight,
   double[] returns
);

Parameters

weight
weight[i] is the weight of the asset i, at the start of the period until consideration. Note that by definition, x[0] + x[1] + ... + x[N - 1]=1; where 0 > c[i] > 1, for all i.
returns
returns[i] is respectively the real or expected return for the ith asset over the given period. If the returns are given as percentages then the returned result will expected real or expected percentage change of the portfolio over the period considered. If on the other hand the returns are given as absolute changes either real or expected then the returned result will expressed the real or expected absolute return of the portfolio of the period considered.

Return Value

The double equal to the real or expected return of a portfolio.

Remarks

Real or Expected Returns

If the return values used refer to the known historical values of the assets over a given period of time then the (known) real (historical) return is evaluated. If however an estimate of the expected return is used then the future expected return of the portfolio over the future period considered will be given.

Application of the Real or Expected Return to Performance Evaluation

Knowing the real return of a portfolio allows the direct comparison between the absolute returns of portfolios. Within a portfolio theory framework knowing the expected return of a portfolio will give us an indication of its level of risk. In particular, if we have already evaluated the efficient frontier for the collection of asset from which the portfolio is constructed then we will be able to read off the lower bound of the risk of the portfolio.

Remark: The real (historical) return does not take into account the historical risk of the portfolio.

See Also

PerformanceEvaluation Class | WebCab.COM.Finance.Portfolio Namespace