notices - See details
Notices
WG
William Gilmore, CFA (not verified)
24th June 2024 | 6:44am

I agree with the author, "volatility drag" is a myth. Using geometric returns to describe performance is fine, but I see spurious models of how a volatile investment behaves. A good starting point would be to assume a lognormal distribution and model accordingly.
There also seems to be much confusion between arithmetic and geometric returns and when they should be used.
If your assumptions are appropriate and you apply them correctly you will see that "volatility drag" is indeed a myth and a product of the myth-follower's flawed assumptions.