Rate of return of a financial portfolioRate of return of a single assetThe rate of return ![]() Log-returnsOften, the rates of return are approximated, especially if the period length is small. If ![]() with the latter quantity known as log-return. Rate of return of a portfolioFor Assume that at the beginning of the period, we invest a sum ![]() The rate of return of the porfolio is the relative increase in wealth: ![]() The rate of return is thus the scalar product between the vector of individual returns Note that, in practice, rates of return are never known in advance, and they can be negative (although, by construction, they are never less than |