[R-SIG-Finance] use log return or quotient return?

Krishna Kumar kriskumar at earthlink.net
Fri Nov 17 13:20:17 CET 2006

There are atleast three ways to compute returns take first differences , 
take first differences and scale, take first differences of the log returns
One of the nice aspect of  first differences of log is that they include 
scaling and all the three are approximately the same(as Gabor points 
out) at high-freq over a short period of time. But if you had a lower 
freq data over a much longer period of time then it is useful to 
investigate the statistical properties of the returns before going one 
way or the other.


Gabor Grothendieck wrote:
> It depends on how good the approximation log(1+r) = r is and that
> depends on whether r is sufficiently small or not.
> On 11/13/06, Michael <comtech.usa at gmail.com> wrote:
>> Hi all,
>> Does anybody know which is more commonly used in financial time series --
>> log return or quotient return?
>> Thanks a lot,
> _______________________________________________
> R-SIG-Finance at stat.math.ethz.ch mailing list
> https://stat.ethz.ch/mailman/listinfo/r-sig-finance

More information about the R-SIG-Finance mailing list