Exercise

Annualizing portfolio returns

Suppose you invested $101 at the beginning of 2015 in a portfolio. By the end of March 2018, you wonder how your portfolio has performed over time, and whether it is as good as another portfolio which started trading mid-2016. What performance metric do you look at? Well, the annualized return of course!

So let's calculate the annualized rate of return for your portfolio. Since our sample covers 3.2 years, let's use the monthly denomination in the formula for annualized returns. The number of months is already given under months.

Available are the data on portfolio returns under pf_returns, as well as as a separate series pf_AUM containing the portfolio's value, or assets under management (AUM). Good luck!

Instructions 1/2

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  • Calculate the total rate of return from the first and last observation stored in the portfolios value series pf_AUM. Use indexing again to take the last and first observation from the series.