Over time, holding period returns tend to overstate the true annualized rate of return.

Name: Over time, holding period returns tend to overstate the true annualized rate of return.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

Holding period returns do not account for the compounding effect over multiple periods, which can lead to an overstatement of the true annualized rate of return when simply annualizing a multi-year return without adjusting for compounding.

Over Time, Holding Period Returns Tend to Overstate the True