Risk and Compound Return

Seminar on the Analysis of Security Prices, May 13-14, 1976

46 Pages Posted: 29 Mar 2014

Date Written: May 1976

Abstract

The geometric mean or compound return is (generally) the appropriate measure of multi-period return. Given intertemporally independent and indentically distributed returns over time, then we will show that: a) compound return is asymptotically normal, N-period terminal wealth is asymptotically lognormal; b) median N-period terminal wealth is asymptotically a direct function of expected compound return; c) expected compound return decreases as a function of the number of periods.

Suggested Citation

Michaud, Richard O., Risk and Compound Return (May 1976). Seminar on the Analysis of Security Prices, May 13-14, 1976, Available at SSRN: https://ssrn.com/abstract=2416905 or http://dx.doi.org/10.2139/ssrn.2416905
No contact information is available for Richard O. Michaud

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