Portfolio Management【Reading 44】Sample
An asset manager’s portfolio had the following annual rates of return:Year | Return | 20X7 | +6% | 20X8 | -37% | 20X9 | +27% |
The manager states that the return for the period is −5.34%. The manager has reported the:A)
| geometric mean return. |
| B)
| arithmetic mean return |
| C)
| holding period return. |
|
Geometric Mean Return = = −5.34%
Holding period return = (1 + 0.06)(1 − 0.37)(1 + 0.27) − 1 = −15.2%
Arithmetic mean return = (6% − 37% + 27%) / 3 = −1.33%. |