V. 19:7 (34): Sidebar: Returns by Tushar S. Chande
Product Description
Sidebar: Returns by Tushar S. Chande
Traders look at prices and are usually uncomfortable with the academic terminology of returns. Think of returns as the changes in prices, though it can get more complicated. Academics like to use “returns” because the act of computing changes in prices (sometimes called differencing) detrends the datastream, creating a series of data that has been cleansed of at least one source of bias.
Actually, returns are usually not computed as just the change in prices. The simplest computation compares the change in price to the original price to generate a percentage change.
Traders look at prices and are usually uncomfortable with the academic terminology of returns. Think of returns as the changes in prices, though it can get more complicated. Academics like to use “returns” because the act of computing changes in prices (sometimes called differencing) detrends the datastream, creating a series of data that has been cleansed of at least one source of bias.
Actually, returns are usually not computed as just the change in prices. The simplest computation compares the change in price to the original price to generate a percentage change.
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