It’s equivalent to
[ 1+(cumulative return) ] ^ (1/ (time in years) )
Note: 12/42 = 1/3.5
It’s ok to use the 1/2 year unweighted in computing the cumulative return, because you take care of the half-year when you are calcuating how many years have gone by in the exponent. If you haven’t gone very far into the year, the YTD still contributes to the cumulative return, it’s just not usually a very big number. |