Estimates the expected returns from the historical values of a collection of assets by evaluating the arithmetic average of the returns for each asset within the collection over the period considered.
historicalReturns[i][t]
is the return (in absolute or relative percentage terms) of the i
-th asset of the collect in the t
th period. Note that if the absolute (resp. percentage) returns are used then the estimated expected return will be expressed in absolute (resp. relative percentage) terms. Moreover, if the daily returns are used then the estimated return will be an estimate of the daily return and so on.This method applies exactly the same procedure as ExpectedReturn except that here we evaluate the expected returns of a collection of assets rather than just one.
The number of historical values which should used
The number of historical values used here in order to estimate the expected return should reflect the length of the period over which a reliable estimate of the return is required. For example, if an estimate of the 1-month return is sort then it is reasonable to use at least the last 1-months historical values up to a few years historical values in its estimation.
If the market under consideration goes through seasonal or business cycles, or if a given company has transformed itself then the observations used in order to estimate the expected return should reflect these issues. For example, if company which was a diversified general industrial company has since refocused on certain key areas, then in terms of estimating its expected return from its historical values it is reasonable to only consider the period after the company refocused.
AssetParameters Class | WebCab.Libraries.Finance.Portfolio Namespace