Transforming Daily Prices into Monthly Log Returns in R

Описание: Discover how to convert daily asset prices into monthly log returns using the `tidyverse` and `tibbletime` packages in R. Learn step-by-step strategies to troubleshoot common errors.
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This video is based on the question https://stackoverflow.com/q/68267956/ asked by the user 'dkolkin' ( https://stackoverflow.com/u/4722313/ ) and on the answer https://stackoverflow.com/a/68270020/ provided by the user 'Ronak Shah' ( https://stackoverflow.com/u/3962914/ ) at 'Stack Overflow' website. Thanks to these great users and Stackexchange community for their contributions.

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Transforming Daily Prices into Monthly Log Returns in R

Finance enthusiasts and data analysts often need to transform asset prices into returns for analysis. If you're working with daily price data and want to convert this information into monthly log returns using R, you might run into errors along the way. In this post, we will explore a common problem associated with this transformation process and provide a clear solution.

The Problem: Error in Transforming Prices to Returns

While attempting to replicate the code from the book "Reproducible Finance with R," a user encountered an error after trying to compute monthly log returns. The code snippet they utilized resulted in:

[[See Video to Reveal this Text or Code Snippet]]

This issue arose during the tq_transmute step, indicating that the code was failing to recognize the "asset" column after the data manipulation steps.

Understanding the Data Structure

Before diving into the solution, let's review the code structure:

Asset symbols: defined as symbols, which contains the ticker symbols like "SPY", "EFA", etc.

Price data: retrieved using getSymbols() from Yahoo Finance.

The original code attempts to gather the data and compute log returns, but it uses outdated functions that have since been replaced in R.

The Solution: Using pivot_longer and pivot_wider

The updated approach to handle data manipulation includes using the pivot_longer and pivot_wider functions from the tidyverse package. This modern replacement for gather and spread is crucial for consistent results without error messages.

Step-by-Step Solution

To resolve the issue, follow these steps:

Load Required Libraries:
Ensure you have the necessary libraries installed and loaded:

[[See Video to Reveal this Text or Code Snippet]]

Transform the Prices Data:
Replace the outdated functions with pivot_longer and pivot_wider in your data manipulation code:

[[See Video to Reveal this Text or Code Snippet]]

Review Your Output:
The resulting dataset will summarize your monthly log returns neatly. Here is a glimpse of what your output could look like:

[[See Video to Reveal this Text or Code Snippet]]

Conclusion

By adopting the latest functions available in R’s tidyverse, you can efficiently transform daily prices into monthly log returns without encountering the previous errors. This enhanced syntax not only simplifies the coding process but also improves readability and functionality.

Feel free to implement these changes in your analysis and enjoy the streamlined processing of financial data!