Hi, since I did not read the Quantity section book yet, I may need a bit help of this. Vol. 5 Page 46 Example to calculate Unweighted Index What’s the formula for HPR? I can easily figure out HRY. Basically, there are X, Y, Z stocks with various prices during period of T (base) and T+1. Calculate the percentage changes of the index value. Thx.
don’t have books on me, but i believe its just: Ending price-Beg Price + CF (div’s) / Beg price
well calculations are little different in the unweighted index section compared to the HPR formula in QM section. HPR = (End price - Beg price + Dividends)/Beg price in the unweighted index calculations, author have taken a short cut to calculate GM and had added 1 to the HPR (and this is what we do to calculate GM to avoid the negative returns, as their is no root for -ve real numbers in real numbers, although in complex numbers it exists and unfortunately here we only deal with real numbers) and later raised the result of mutiplication to the power 1/3 and sustract 1 from it to calculate GM. But for understanding, here is the long method of calculation. HPR = 0.2, -0.09, 0.07 GM = [(1+0.2) * (1+(-0.09) * (1+0.07)] ^ (1/3) - 1 = [1.02 * 0.91 * 1.07]^(1/3) - 1 = 1.168^(1/3) - 1 = 1.0531 - 1 = 5.31% In the example they are trying to prove the downward bias of GM, compared to AM of 6%
Thanks, madanalyst. GM? I first thought it’s General Motors. 
So in our book example, actually we simplified and calculated as below, correct? HPY = (End price - Beg price)/Beg price HPR = 1 + HPY AM = sigma HPY / n (# of samples) GM = II HPR ^ (1/n)
hyang Wrote: ------------------------------------------------------- > Thanks, madanalyst. GM? I first thought it’s > General Motors. > > So in our book example, actually we simplified and > calculated as below, correct? > > HPY = (End price - Beg price)/Beg price > > HPR = 1 + HPY > > AM = sigma HPY / n (# of samples) > > GM = II HPR ^ (1/n) I think its summation rather sigma for AM, everything else you got right