How to calculate daily return?

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How to calculate daily return?

posted

Hi,

I am very new to the community as well as to coding. I have a very simple question but it has been confusing me for the past several days.

I am trying to use the UsEquity data set and compute the daily return for all stocks: Below is how I define it:

inputs = [USEquityPricing.close]
window_length = 2

def compute(self, today, assets, out, close):
out[:] = close[0]/close[-1]*100

Basically, I am using the current period's closing price and divide it by previous period's closing price. Then I magnify it by 100 just for the ease of reading the result.

After running through several back tests, I found that the return calculated using this formula seems to be wrong (stocks that have losses on a particular day have return calculated to be above 100 in my case). Can anyone here shed a light on where I might be wrong?

Thanks in advance.

5 responses

Thanasis Efthymiou

Must be:

out[:] = (close[-1]/close[0] - 1) * 100

Hi Thanasis,

Thank you for the response! I tried and it worked out perfectly. May I ask you why I need to use the prior day divide by current day? It seems to be up-side down?

Thanasis Efthymiou

Hi mencgche chen,

close[-1] is the current day (close[-2] is the prvious one and so on...)

close[0] is the start day (in your case with window_length = 2 it is the previous one)

Hi Thanasis,

Thank you very much for the clarification. Makes sense.

Thanasis Efthymiou

your welcome

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The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian.

In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.