03. Log Returns

M1L5 03 Log Returns V5

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Log Returns

log return =R=ln(ptpt1) = R = \ln\left(\frac{p_t}{p_{t-1}}\right)

raw return = r = ptpt1pt1 \frac{p_t - p_{t-1}}{p_{t-1}}

Converting between raw returns and log returns

R=ln(r+1) R = \ln(r+1)

r=eR1 r = e^R - 1