Valuation : Question 10
Could you explain how to calculate the logarithmic returns of a share portfolio and provide an example?

Assume you have the following share prices: 100 ; 105 ; 110 ; 105 ; 120 ; 125.

You transform them by taking their log: 4.605; 4.654 ; 4.700; 4.654; 4.787; 4.828.

And you calculate the returns by the differences based on these figures: 4.654 – 4.605 = 0.05; then 4.700 – 4.654 = 0.046; - 0.046; 0.133; 0.041.

Then if you wish, you can calculate the average, the standard difference for this series of returns.