Daz Toolkits

Daz is an evolving collection of toolkits for the professional investment analyst.

Over time, the toolkits will fall into three types: Analytics, Data and Reports.  At this time only three Analytics modules are available.  Four Data modules are under development.  The Report modules will appear in the second half of 2010.

Why Tools?

Definition: Instruments used in a profession, e.g., tools of the trade.

Tools have been the helpers of craftsmen for millennia.  Each craft has its own characteristic tools, and each craftsman has his/her own distinct preferences.  The wrong tool is worthless.  The right tool is invaluable.  The hand knows which is which.

Daz is such a collection of tools.  These are discrete toolkits, each fit for a purpose – distinct and complementary to the other toolkits.  They are designed for the craftsman who knows his/her craft.  They provide the standard, expected, instruments as well as the more unusual instruments.  There are some bespoke instruments that have been created by a practitioner for his/her own use.  All of the tools are controlled directly by the craftsman, in his/her workbench: Excel.  The collection encourages the craftsman to seek out the right tool for his/her purpose not just the commonest tool.

Analytics

There are three collections of Daz analytic tools: DazStat, DazRatio and DazBeta.  They share a common design theme:

  • All of these toolkits run inside Excel as user-defined functions, just as any Excel-provided function
  • The function parameters are consistent within each module
  • The functions are differentiated by the first parameter so the craftsman can move between functions by changing one switch
  • Most functions return an array of secondary results as well as the default primary result
  • Each toolkit can return all primary and secondary results as a single array
  • The source returns may be arranged vertically or horizontally
  • The source returns may be in decimal (0.03) or percentage terms (3.0)
  • Leading and trailing zeroes are ignored
  • Every function can return its own label
  • Returns can be of any periodicity

DazStat is the fundamental toolkit.  Its focus is on the characteristics of the distribution itself.  In particular, DazStat emphasizes tests for randomness and conformity with the Normal distribution function.  If the returns do not conform to the Normal distribution function then most of the standard descriptive statistics used in conventional investment analysis will be invalid.

DazRatio focuses on risk-adjusted performance measures.  Different craftsmen have different preferences for these ratios so this toolkit provides many tools that may be compared.  All these tools allow the craftsman to specify a constant minimum acceptable return (MAR).

DazBeta is the most complex toolkit.  These tools include conventional and proprietary measures for the relationships between returns such as correlation and Beta.  These tools are quite subtle and benefit greatly from being part of a standard function library for consistency of analysis.  While DazRatio provides for a constant MAR (consistent with convention), DazBeta provided an alternative of specifying a time varying return array as dynamic MAR.

Other Analytic and Data Tool Kits

DazBetaMatrix is designed to facilitate non-parametric measures associated with Beta. Beta is a very useful in asset management because it is widely understood to represent an asset’s risk relative to a common market index or benchmark. Unfortunately, like many other common analyses it is unfit for its purpose. DazBeta provides non-parametric alternatives and DazBetaMatrix combines those with matrix processing to allow multiple assets to be assessed against multiple indices to provide the user with a better Beta based on non-parametric measurements with a specified degree of confidence.

DazOptions provides support for American and European option types, with all secondary terms that makes matrix processing very easy and consistent for pricing and non-parametric derivatives of price.

DazTools is a small package of data manipulation tools that allow simple conversion of daily data to monthly arrays or arrays to linear series. It also allows you to process data arrays against event rules to filter out events meeting complex criteria for further analysis. This are fundamental tools for any data analyst!