Computing Market returns conditional on the "STATE of the MARKET". Finance. Portfolio Management.

CATEGORY: FINANCE

Hi everybody, I am new to matlab and I have a problem matlab.

I am measuring the performance of a stock portfolio depending on the state of the market. I have 3 vectors: STOCKPORTFOLIO return, MARKET return, CUMULATIVE MARKET return.

1 – I define the past state of the market as Up or Down if the cumulative 12 month return (t-12 -> t-1) is positive or negative.

2 – I define the current state of the market as Up or Down if the simple Market return for month t is positive or negative.

I am able to define 4 states: UPUP, UPDOWN, DOWNDOWN, DOWNUP.

3 – Now I have to hold the stock portfolios for six months (t+1 -> t+6) and calculate it return.

I could solve up to point 2 but I can’t compute the portfolio performance depending on the market state (UPUP, UPDOWN…etc)

I have a vector of stock return, a vector of the market state filled with 1,2,3,4 (where 1 stands for UPUP , 2 FOR UPDOWN and so on) and the vectors of market returns and cumulative market returns.

I don’t know how to associate to each month t+, t+2,t+3,t+4,t+5,t+6 the corresponding Stock portfolio return.

I guess it is not clear at all :) :) …I did my best in explaining!

I hope some of you can help me, that would be very appreciated.

Thankz, Paolo