Kipp, Martin; Koziol, Christian - In: Credit and Capital Markets – Kredit und Kapital 53 (2020) 3, pp. 355-381
The paper revisits the two major concepts for average historical returns, i.?e., the arithmetic mean and the geometric mean, in order to clarify which approach must be used for which application. Conducting a rigorous derivation with a geometric Brownian motion, we can explain that the...