Calculating the compound annual growth rate

[Robert Bianchi <r.bianchi@xxxxxxxxx>]

Hi Charles,
I assume that when you say you want to calculate the "compound annual 
growth rate", you are really saying that you want to calculate the 
"compound annual rate of return" or CARR.
There are a few ways of calculating it, but the most basic method is to 
estimate CARR is to do the following in either ELA or Excel:

STEP 1 - Calculate the "Total Return" which is (endequity/startequity)-1

STEP 2 - ((1+Total Return)^(X/TimePeriod))-1

where X depends on time series frequency, where X = 1 for annual data, 12 
for monthly, 52 for weekly and 250 to 252 for daily time series.

E.g.
End Value = $1,200
Start Value = $1,000
Time Series Frequency = monthly
Time Period = 24 months

E.g.

STEP 1 - Calculate the "Total Return" which = (1,200/1,000)-1 = 0.20

STEP 2 = ((1+0.20)^(12/24)-1 = +9.54%

Therefore, the CARR = +9.54%

HTH

Rob Bianchi
r.bianchi@xxxxxxxxx

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Date: Fri, 7 Mar 2003 15:20:51 -0500
From: "Charles Johnson" <cmjohnsonxx@xxxxxxxxx>
To: "Omega-List" <omega-list@xxxxxxxxxx>
Subject: CAGR
Message-ID: <PPEFLNPEIDBABFOGPPELEEHBDMAA.cmjohnsonxx@xxxxxxxxx>
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What is the formula for use in Easylanguage or Excel for calculating the
compound annual growth rate of a series of periodic returns?
Thanks.