[R-SIG-Finance] returns convention

[Jeff Ryan]

It seems to be common within academic literature - econometric and
finance, though I'd not go so far as to rely on one definition across
a range of applications.  Probably should/could be, but unlikely to
ever happen.  Even my quantmod package isn't entirely consistent - as
some functions are log diff and others simple percent changes -
depending on use. Though I *think* it is documented where each is
used.

And as far as I can tell, my trading accounts don't change by log
differences : )

Jeff

On 10/8/07, paul sorenson <sf at metrak.com> wrote:
> Is it usually assumed that references to "returns" are calculated as
> diff(log(prices))?  Compared with say the simple fractional change from
> one price to the next?
>
> For example, in PerformanceAnalytics I notice that the default value of
> CalculateReturns is diff(log(prices)).
>
> I guess it probably doesn't matter much either way for small changes, I
> just wanted to know if there was some common convention when I see an R
> function that expects a returns vector.
>
> cheers
>
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