bpdulog

d0pa, I don't think it makes sense to use geometric mean for the cross section e.g. the average return for a given year across all securities. And in Excel, method 1 & 2 yield different results (ca 5% difference).

F-MBA, yes #1 seems a better approach. Although what makes me wonder is the fact that the annual returns that I calculate have an internal dispersion. But when I calculate the st dev for the asset class (e.g. the st dev of the series of mean annual returns) I never use that internal dispersion, so I am not leveraging all info included in my data set?

Jana, my securities are actually funds (active and passive), hence there is no market weights I can use ... right?

And finally, I came across a statistical approach called (TSCS) which promises to combine a time-series with a cross-sectional analysis, which I believe may be what I need. Anyone familiar with it? is it relevant?