More accurate Annualised Returns calculation

Quant Trading Strategies & Ideas
1

Course Name: Quantitative Portfolio Management, Section No: 14, Unit No: 1, Unit type: Notebook

A more accurate method is to use the geometric mean for calculating the annual returns:

geometric_mean_return = np.prod(1 + returns['portfolio']) ** (1/len(returns)) - 1
annual_returns = ((1 + geometric_mean_return)**(trading_days) - 1)*100
 

2

Hey Antonios,



Yes, both ways of calculating annual returns is correct and you can choose to use the geometric_mean to get the annual returns instead of mean()