Secondary menu

Precious Metals

Submitted by karenhorn@cal.b... on 30 March 2011 - 12:35am

I want to create a portfolio with gold and silver but don't know how to figure the nominal rate of return or beta for those. The steep rise of precious metals lately is not the norm over time, obviously, but what is?

‹ Spending Behavior: Aggressive, Cautious, or Conservative Different Results with Monte Carlo ›
Submitted by Dick Munroe on 30 March 2011 - 10:34am.
1

The procedure is to get as long return series (nominal or real, doesn't matter) as you can for these assets. Then use the asset module tool to get the proper values for the nominal rate of return, the relative risk and the eBeta for them to enter into ESPlanner as User Defined Assets.

See the forum article "Care and feeding of User Defined Assets" for more details.

In the to-be-release update to ESPlanner, you'll be able to incorporate these assets as "regular" assets instead of user defined assets.

Best,

Dick Munroe

Submitted by esplanner on 8 April 2011 - 9:15am.
2

If you need to create a series, here's what you do:

1. Go back into the past as far as you can to get the end of year prices for the commodity in question.

2. Enter each of these into a column of a spread sheet.

3. Divide year's end-of-year price by year - 1's price, subtract 1 and multiply by 100 to get the %age increase or decrease, e.g., =((A2/A1)-1)*100 would be the excel formula to calculate this for values in cell A1 (year - 1) and A2 (year).

4. Enter all the %ages as nominal rates of return.

5. Use the resulting asset module or the values given you by the asset module tool in ESPlanner.

This method applies to any asset or collection of assets you wish to use in ESPlanner as a user defined asset and is, in effect, what we do to derive the appropriate financial information for our canned assets.

Best,

Dick Munroe

Share this

Navigation