Question: Briefly explain why it is convenient to use log-returns in practice. Remember that they are defined as: LR = log (*x+1) Where Xn+1 and

Briefly explain why it is convenient to use log-returns in practice. Remember

Briefly explain why it is convenient to use log-returns in practice. Remember that they are defined as: LR = log (*x+1) Where Xn+1 and X are the prices at times n + 1 and n. Also, discuss the advantages and disadvantages of using log-returns vs. rates of return.

Step by Step Solution

★★★★★

3.40 Rating (147 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

Using logreturns in practice has several conveniences Firstly logreturns allow for additive calculations instead of multiplicative calculations which ... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

In exercise 27.1 we extended our analysis of subsidized voluntary giving from 2 to N people. In the process, we simply assumed the government would set t to cover its costs and that individuals...

Consider the own- and cross-price elasticity data in the table below. CDs % change in price CDs Magazines Cappuccinos -0.25 0.06 0.01 -1.20 0.27 -0.85 % change in quantity Magazines-0.13 Cappuccinos...

Briefly explain why it is necessary to prepare the statement of income before preparing the statement of changes in shareholders equity.

Describe the types of cybercrimes facing organizations and critical infrastructures, explain the motives of cybercriminals, and evaluate the financial Explain both low-tech and high-tech methods...

CHAPTER 7 Coaching for Per fo rm ance Once you have begun to delegate, you need to be able to work with your direct reports so that they are successful in their assignments. This managerial skill is...

Let A, B be sets. Define: (a) the Cartesian product (A B) (b) the set of relations R between A and B (c) the identity relation A on the set A [3 marks] Suppose S, T are relations between A and B, and...

Explain informally the difference between Godel's completeness theorem and his first incompleteness theorem. [8 marks] (b) State the meaning of Hoare triples {P} C {Q} in separation logic. [3 marks]...

(Questions from Lecture and Article) - Discussion Board Activity I need to read the following Lecture Note and the ?Wall Street Journal? articles that I uploaded, and writeanswers for theDiscussion...

Hi, I am doing a project for derivatives class and I have some questions about a regression and Monte Carlo simulation that I need to come up with. So the goal is to hedge against CDS instruments by...

Let r and s be solutions to the quadratic equation x 2 b x + c = 0. For n N, define d0 = 0 d1 = r s dn = b dn1 c dn2 (n 2) Prove that dn = r n s n for all n N. [4 marks] (b) Recall that a commutative...

Find the Supreme Court case involving Corn Products Refining Company (not the one in which rehearing was denied). a. What is the citation for the case? b. How many Supreme Court cases cite the Corn...

Mattel Inc. is the leading toy maker in the world. The companys revenues exceed $ 6 billion. In the toy business, it is very difficult to determine the life expectancy of a product. Products that...

Let P = f ( t ) represent the US population in millions in year t . ( a ) What does the statement f ( 2 0 0 5 ) = 2 9 6 tell you about the US population? In 2 9 6 years there will be 2 0 0 5 million...

Show that each of the following derivability claims holds in SD+. Prove using SD+ rules 1. (A V B), ~(A & C), ~BH (CD) 2. (((A V~A) & B) = B) 3. (B E (B & A)) (BDA) 4. (A E ~C), (A V ~C), BHA (((ADB)...

If project managers increase the poce of their daily interaction such as tak and walk more quiclk, pot to work sooner and leave work later, the project manager is leading by example through which of...

a.-d. Answer the same questions as in parts (a) through (d) in Problem 1 regarding an analysis of covariance designed to control for both AGE and QUET. (AGE = 53.250.) Use the results from Problem 9...

An advertising company evaluated three types of television ads for a new, low-cost, subcompact automobile: visual-appeal ads, budget-appeal ads, and feature-appeal ads. To control for age...

An experiment to evaluate the effects of certain variables on soil erosion was performed on 10-foot-square plots of sloped farmland subjected to 2 inches of artificial rain applied over a 20-minute...

Explain in your own words what an uncertain quantity or random variable is. Why is the idea of an uncertain quantity important in decision analysis? Use the probability table to find the following:

Suppose you are a contestant on the television game show, Lets Make a Deal. You must choose one of three closed doors, labeled A, B, and C, and you will receive whatever is behind the chosen door....

Calculate the variance and standard deviation of the payoffs in the final court decision in the Texaco-Pennzoil case as diagrammed in Figure 4.2.