However, this type of calculation is called simple annualization and does not consider the effects of compounding. A 0.5% monthly return (r) nets approximately 6.17% annually when compounded monthly, according to the formula [(1 + 0.005)12- 1]. This difference appears minor in this example, ...
weekly, or monthly returns. However, when we want analyze the risk-adjusted performance of an investment, we tend to use measures of volatiσlity that expressed in annual terms. For example, when we compare the Sharpe ratio between different investments, there are almost always expressed in annu...