Is there a rule of thumb when it comes to annulize the compound rate? should we use geometric compound or arithmetic when calculate realized return? Can some one give a summary on this? thanks
arithmetic if you want a future predicted return geo if you want a historical return rate
so in the case of realized return, it should be geom compounding because it is realized in the past?
you use geometric when you have a series of past returns you need to represent, such as 10%,25%,12%. you use geometric to find the compound rate that will give the same result over the same time period hope that helps