Lets say we have "today's" snapshot of asset allocation and need to determine the 6mo, 1 yr and 5 yr risk and returns of this portfolio. If the time series for every asset is very long, longer than ...
Two popular ways to measure returns are Arithmetic returns and Log returns. Let's define arithmetic (simple period) returns as: P(t) - P(t-1) / P(t-1). Let's define log return as Ln( P(t)/P(t-1) ) or ...