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Lopez,
Don't remember this ever having been written before so it will have
to be written from scratch.
Let's get started by an explanation first.
Maybe we can get some others to jump in and help here as well.
>From Investopedia:
The year-over-year growth rate of an investment over a specified
period of time.
The compound annual growth rate is calculated by taking the nth root
of the total percentage growth rate, where n is the number of years
in the period being considered.
CAGR isn't the actual return in reality. It's an imaginary number
that describes the rate at which an investment would have grown if
it grew at a steady rate. You can think of CAGR as a way to smooth
out the returns.
Don't worry if this concept is still fuzzy to you - CAGR is one of
those terms best defined by example. Suppose you invested $10,000 in
a portfolio on Jan 1, 2005. Let's say by Jan 1, 2006, your portfolio
had grown to $13,000, then $14,000 by 2007, and finally ended up at
$19,500 by 2008.
Your CAGR would be the ratio of your ending value to beginning value
($19,500 / $10,000 = 1.95) raised to the power of 1/3 (since 1/# of
years = 1/3), then subtracting 1 from the resulting number:
1.95 raised to 1/3 power = 1.2493. (This could be written as
1.95^0.3333).
1.2493 - 1 = 0.2493
Another way of writing 0.2493 is 24.93%.
Thus, your CAGR for your three-year investment is equal to 24.93%,
representing the smoothed annualized gain you earned over your
investment time horizon.
Preston
--- In equismetastock@xxxxxxxxxxxxxxx, lopez abduch
<lopezabduch@xxx> wrote:
>
> Hi,
>
> Does anybody know how can I create a formula for metastock for
CAGR (Compound Annual Growth Rate)?.
>
> Thanks in advance.
>
>
> ---------------------------------
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