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st: Overlapping equalweighted portfolio return


From   yannan shen <yannan2010@gmail.com>
To   statalist@hsphsun2.harvard.edu
Subject   st: Overlapping equalweighted portfolio return
Date   Mon, 20 Aug 2012 20:04:53 -0400

Hi dear statalist,

I have panel data for some monthly returns of stocks that I have already
assigned into 2 portfolios ( group identifier: "group 1" or "group 2" based
on past performances). My goal is to generate portfolio holding return
(holding period varies from 3 months to 4 years):

For the 3month holding period return, portfolio 1 is created as the
following:

at time 0, invest one third of fund to buy stocks that was marked as "group 1"
at t0.
at time 1, invest one third of fund to buy stocks that was marked as "group 1"
at t1.
at time 2, invest one third of fund to buy stocks that was marked as "group 1"
at t2.

This process is repeated every month.

Start from time 3, I want to calculate the monthly return of my portfolio, which
should be average of return from 3 groups of stocks that were selected
from the last 3 months.

portfolio 2 is designed the same as portfolio 1.

I want to generate time-series return for these two portfolios. I thought
of a manual approach but it gets tedious as the holding period gets longer,
let's say 48month. I believe there must be a better way of doing it. Can
someone please help me with this?
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