Log returns and portfolio calculations

[krose]

Hi

I've been working on a spreadsheet where do some portfolio calculations, and have just seen the screencast on log returns. Now I am worried that my results regarding the expected portfolio return on sheet 2.4 are wrong, because I have used log returns.

Should I have used discrete returns instead?

I've uploaded the spreadsheet so you can take a look at my method. I haven't made any VBA code or Macros.
I hope someone can clear this out for me.


/Kenneth

 

[krose]

It won't upload the spreadsheet..

 

[krose]

I can't upload the spreadsheet with IE instead of Firefox.. this error message is shown on top of the page..:


Notice: Undefined index: preview in /home/bionictu/public_html/btsystem/modules/forum/mod.forum_core.php on line 6421

 

[David Harper CFA FRM]

Hi krose,

I tripled the upload limit; I am thinking your XLS was too big (new limit = 3 MB). I am attaching my discrete/compound XLS just as a test. If you try again, I will take a look at your log return XLS. Thanks, David

 

[krose]

Hi David.. thanks a lot! I've placed a link to the file in my dropbox (a clever backup system) instead. I still get the error message I described in the last post.


http://dl.getdropbox.com/u/549701/Exercise 2.xlsm

I hope this is OK.

 

[David Harper CFA FRM]

Hi Kenneth,

Re the red cell J34, you merely have the matrices reversed (I've done this before so many times!): you want the 1 x 4 returns multiplied by 4 x 1 weights to return the 1 x 1 product; as you have it (4 1 x 1 4 = 4 x 4), you are returning only cell 1,1 in a 4,4 matrix. So, this doesn't look to me like a lognormal issue. Hope that helps, David