Economics, Econometrics and Finance
4 years ago

Annualisation method impacts asset allocation and risk in investment portfolios.

SSRN Electronic Journal
Optimum Allocation of Weights to Assets in a Portfolio: The Case of Nominal Annualisation Versus Effective Annualisation of Returns
Arun J. Prakash, Chun‐Hao Chang, Brice V. Dupoyet

Paper Summary

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The article compares how different ways of calculating annual returns affect the risk and allocation of investments in a portfolio. By looking at actual data, the researchers found that the method of annualization significantly impacts the risk and allocation of assets in a portfolio.