Estimate of Compound Annual Growth Rate (CAGR)
Consider the Taylor series:
Taking only the first two terms one has:
Realistically, most financial assets have negative skewness and leptokurtosis, so this formula tends to be over-optimistic. Some people use the formula:
for a rough estimate, where k is an empirical factor (typically five to ten).
Read more about this topic: Volatility (finance)
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