Questions / Quant research, Take-home data cases
Compounding a price series
Daily closes for one stock are below. What is the total return from the first close to the last, in percent?
day,close
1,100
2,102
3,99.96
4,101.96Answer it in the app It's free. You get hints, a second try if you miss, and a follow-up question.
Show the answer and worked solution
Answer: 1.96%
- Total return = last/first − 1.
- 101.96/100 − 1 = 1.96%.
Interview shortcut. Compound, do not add: 101.96/100 − 1.
Takeaway. Returns compound. They do not add.
In the app this has a follow-up where one thing about the setup changes. Try the follow-up.