Return Series
Return series consist of returns for a set of assets, expressed as percentages, at regularly spaced intervals over a period in time. The Estimator uses the raw data in the return series to estimate historical means, standard deviations, and correlations. Return series can be saved, loaded, imported from online sources, or entered directly into Excel either manually or through copy/paste.
Return Series Preparation
Return series appear on the Asset Returns Worksheet.
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Use the File>>New>>New Return Series Option to access the New Return Series Wizard. Enter the characteristics of the new return series (below), then click the OK Button. A grid appears with the dates to the left and a column for each asset. A thick black line delineates the area to be completed. Each cell within the grid populates with "N/A", indicating that the cells can be edited.
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Start and End Dates -- Enter the dates of the earliest and latest return observation, even if these vary between assets. The Estimator contains tools for adjusting the date range to fit your needs. Click on the triangles at the end of the date fields to access a calendar. You can add or remove dates later. Note that the Estimator cannot handle dates earlier than 1900.
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Period -- Select year, month, quarter, week, or day depending on the frequency of the return observations. The maximum number of observation dates is 10436 for weeks, 2400 months, 800 quarters, or 200 years. For daily data, review the warning below.
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Number of Assets -- Enter the number of assets that you wish to include in your return series. Add or remove columns later at your discretion. The maximum number of assets is 200.
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Double check the dates to ensure that they match the dates on your return observations, repeating step one as necessary. Regular observations are essential. For instance, you cannot combine bimonthly and weekly observations.
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Enter asset names, tickers, descriptions and groups as desired. If you do not want to use groups or descriptions, you can hide the row in the Display Menu.
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Insert collected return observations in the appropriate columns. Copy return observations from other spreadsheets or old return series, use the Yahoo! returns importer, import from Bloomberg, or enter return observations manually. Commonly, users load an old return series and add the most recent return observations either by typing them in or copying them from a spreadsheet. For missing data, enter a letter not a zero; the cell populates with "N/A" in red. The Estimator is limited to 200 assets. The maximum number of observation dates is 10436 for weeks, 2400 months, 800 quarters, or 200 years.
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If you wish to add an additional asset, enter the asset name and return observations in a column outside of the black box, and then click the Validate/Resize button in the Run Section of the NFA ribbon. Estimator resizes the edges of the return series according to row and column headings and redraws the thick black line that delineates the edges.
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Remember that the Estimator is limited to 200 assets.
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When you validate/resize, the Estimator converts your returns to percentages, so if you want the return to be 1%, enter 0.01.
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Update the market portfolio and forecasts if relevant.
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You can insert a column in the middle of the asset returns, but only one at a time. To insert multiple columns, enter the data outside of the box to the right.
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To exclude an asset without deleting the data, use the checkmarks above the return series column. For details, see the Asset Returns Worksheet.
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To delete an asset, delete the column. Highlight the column by clicking on the column letter; right click to call up the menu. Select the Delete option. The column disappears and the box resizes.
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Be aware that there is no Undo function in any of the New Frontier applications, so deleted data cannot be recalled. Using the check box to remove the asset from the asset universe may be a better solution.
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Update the market portfolio as necessary.
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Due to formatting issues, you cannot delete the first column in the return series. Work around this restriction by copying data into other columns, or by using the Asset Selector to reorder assets.
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Using the delete button on the keyboard instead of the delete option in the menu that appears when you right click, deletes the data but not the column.
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You can delete multiple columns at the same time provided that they are contiguous. Non-contiguous columns cannot be deleted at the same time.
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To delete a date, delete the row. Highlight the column; right click to call up the menu. Select the Delete Option. The row disappears. Be aware that there is no Undo function in any of the New Frontier applications, so deleted data cannot be recalled. The black box that borders the return series will be redrawn. Due to formatting issues, you cannot delete the first row in the return series. An alternate way to remove dates from the return series is to adjust the period on the Historical Worksheet.
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If you wish to add an additional date, enter the date and return observations in a row outside of the black box, and then click the Validate/Resize Button in the NFA ribbon. Estimator resizes the edges of the return series based on row and column headings, and redraws the thick black line that delineates the edges.
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Review the return series. Specifically review all cells that report missing data and the Dates Column.
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Save your return series for further use.
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Set a benchmark return series.
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Start historical data adjustment.
Warnings:
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When you add or delete rows, ensure that the dates have a consistent period. If you delete one month in the middle of a monthly return series or add a monthly observation to a quarterly series, the final return series will not be viable.
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For daily data, remember that the Estimator ignores non-trading days as identified by not having a price for that day. It counts the remaining days and uses that number to calculate the annualized return. It does count the days for all assets together, so for the most accuracy, specify the prices for all days including holidays.