When it comes to annualizing returns, most folks think that the rules are pretty straightforward and agreed by all. However, that truly is not the case. And, it is most notable when we’re dealing with a “point-to-point” cumulative return such as June 15, 2016 to January 8, 2019. How do we annualiize this? Well, I […]
Read MoreThis post is about performance charts; it just so happens that I’m using one that just appeared on Twitter by Charles Schwab. As the saying goes, “credit where credit is due,” so I’m obligated to acknowledge my source. But, I’m not really wanting to critique Charles Schwab’s charts … it just that, well, I am […]
Read MoreWe teach how to annualize rates of return in our Fundamentals of Performance Measurement course. Invariably, someone will ask whether using trade days might be better than calendar days. I normally give a brief explanation as to why it wouldn’t, and then move on. But a funny thing happened recently: While conducting a “non-GIPS” verification […]
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Most performance analysts have heard it said that we should never annualize returns of less than one year. Some may also be aware that GIPS provision I.5.A.4 (2010 edition of GIPS) forbids compliant firms from annualizing returns for periods of less than a year? But why shouldn’t this be done? Certainly, we could do it […]
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Sometimes when we are calculating returns, we need to know the meanings of roots and exponents. This may be especially true when we have to enter things on the calculator, like CIPM candidates are required to do on exams. In mathematics, the n-th root of a number x is a number r which, when raised […]
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