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

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

Over time, holding period returns tend to overstate the annual rate of return.​

Quizplus · Accepted Answer

This is because holding period returns do not take into account the compounding effect of returns over time. To accurately calculate the annual rate of return, you should use the Compound Annual Growth Rate (CAGR) formula.

Over Time, Holding Period Returns Tend to Overstate the Annual