Logarithmic return
A logarithmic return is the natural logarithm of an asset’s ending price divided by its beginning price over a period.
Statistics Every Programmer Needs
A log return is the natural logarithm of the ratio of an asset's current price to its previous price, representing a compounded proportional price change.
- How it is used
- Supports Monte Carlo simulation of future stock prices by summarizing historical daily movements.
- How deep it goes
- Defines the formula, implements it in Python, examines its distribution, and estimates mean and volatility for simulation.
- Examples
- Uses GM closing prices, a pandas log-return column, a density plot, and estimated mean and standard deviation.
- What you can do after
- Apply it via NumPy and pandas, then use estimated returns and volatility in a Monte Carlo forecast.
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Investing for Programmers
A log return is the natural logarithm of the ratio between an asset's ending price and its starting price over a period.
- How it is used
- Uses logarithmic returns to compare daily market performance and support statistical analysis.
- How deep it goes
- Defines the metric, contrasts it with simple returns, demonstrates code, and stops short of deeper return theory.
- Examples
- Calculates returns for Apple, Coca-Cola, and NuScale closing-price data, then visualizes their distributions.
- What you can do after
- Apply logarithmic returns with pandas and NumPy, plot their distribution, and inspect potential outliers.
Read how Investing for Programmers explains logarithmic return →
Related concepts
- stock share priceuses · A stock share price is the market value of one share of a publicly traded company or security at a particular time.
- simple returnalternative to · Simple return is the proportional change in an asset’s value over a period, calculated as ending value divided by beginning value minus one.
- returnkind of · Investment return is the gain or loss produced by an investment or portfolio over a specified period, expressed as an amount or relative rate.
- normal distributionused by · A normal distribution is a continuous probability distribution with a symmetric, bell-shaped density determined by its mean and variance.
- dropnaused by · dropna is a pandas method that removes missing values or rows and columns containing them according to specified criteria.
- correlationused by · Correlation is a statistical relationship describing how two or more variables or quantities vary together, including the strength and direction of their association, without by itself implying causation.
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