CAGR does not represent economic reality. A stock position might be up 40% one year and down 5% the next.It is basically year-over-year growth rate of an investment over a specified period of time. It's an imaginary number that describes the rate at which an investment would have grown if it grew at a steady rate.
There are five variables in a compound growth rate calculation:
* Beginning value
* Ending value
* Length of time between the values
* Periodic scale (days?, months? years?)
* Periodic rate of change
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