Generating share prices using index returns as a proxy
Melissa and Andy attempted to fill in missing share prices so that the 1 year historical prices on shares could be used to construct the minimum variance portfolios.
We initially tried to proxy share prices using share prices from shares in the same sector - as it is expected that same sector shares will fluctuate together. Although, using prices as a proxy created the issue of big jumps between prices as another share was copied in - as different shares, in the same sector, have different market capitalisations and prices.
We therefore decided to use returns as a proxy because price jumps would be less. Returns from shares in the same sector are also expected to be similar. Obeid gave us daily prices of indices from different sectors which we used as proxies for missing returns.
The filled in returns were then used to calculate prices.
We initially tried to proxy share prices using share prices from shares in the same sector - as it is expected that same sector shares will fluctuate together. Although, using prices as a proxy created the issue of big jumps between prices as another share was copied in - as different shares, in the same sector, have different market capitalisations and prices.
We therefore decided to use returns as a proxy because price jumps would be less. Returns from shares in the same sector are also expected to be similar. Obeid gave us daily prices of indices from different sectors which we used as proxies for missing returns.
The filled in returns were then used to calculate prices.
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