What is the difference between annualised return and Average Annualised Return?

Question

What is the difference between annualised return and Average Annualised Return? What is the formula for calculating these returns if you have monthly return of the security?

If I have 36 months return then anniualised return would be
(1+r1)(1+r2)..(1+r36)^1/3-1. What will be the average annualised return? Is it same as annualised return?

Answer 1

Average annualized returns are generally compounded monthly such as with a money market account. The number they will give you is based on last year's average.

Annualised returns give actual figures that have future relevance.

Answer 2

Annualised Return

Answer 3

First, you have to understand that returns are quoted on an annualized basis as a general rule in the investment industry. This makes for ease of comparison between difference investment choices.

Second, when someone talks about annualized returns, it generally means the geometric returns (i.e. the geometric mean of returns). Therefore, they aren't talking about the simple average of annual returns. As you know from math, the geometric mean is lower than the arthmetic mean.

When you have monthly returns, you need to chain-link these returns. Let Rn denote the return for that month. For 12 months, then it would be:
[{(1+R1)*(1+R2)...*(1+R12)}^1/12]-1

When you have more than 12 months of returns (say 30 months), then you just have to calculate what the annualized return would equal the return for the entire 30 months.

[Edit I wrote harmonic mean by mistake as I meant geometric mean.]

Answer 4

The annualized return is a monthly return that has been converted into a yearly return because of compounding you cannot just add up each of the months returns

you can work it out using the gemetric return.. work out the holding period return for each month then

GR= (((HPR for m1 * hpr for m2 ect)^1/12) -1)*100

Or you can work out the time weighted or money weighted average return

The average annualized return is just the arithmetic mean of the return for a number of years

Answer 5

Of the 5 hundred agencies interior the S&P 500, 389 pay dividends, and 111 do not. the familiar annual dividend yield of all 500 agencies is a million.seventy 9% in case you purely evaluate the dividend paying agencies and forget human beings that don't then the familiar is two.30% As to calculating the familiar annualized returns, Dividends are by capacity of their nature not in many cases reinvested so as that they don't compound subsequently a in the present day familiar of dividend yields are desirable however the capital beneficial factors returns of the S&P 500 by capacity of their nature compound so an familiar of multiple annualized returns does not be desirable, a geometrical mean of those returns may be. the least confusing way may be to assert take the top factor to a 10 year window divide it by capacity of the initiating element and take the 10th root to return up with the geometric mean annual return and then tack on the dividend return. i'm unsure how desirable that could be on your situation yet you are able to undergo in strategies that the belief of an familiar may be very deceptive, as is the belief of annualized.