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Understanding Log Returns: Practical Insights for Systematic Trading & Fat Tails Analysis

Jakub's avatar
Jakub
Dec 17, 2024
∙ Paid

In quantitative finance, logarithmic returns (log returns) are foundational tools for systematic trading. Let's consider a real scenario from my trading desk. We were analyzing a portfolio of 1,000+ stocks across multiple time horizons (daily, weekly, monthly). With simple returns, our calculations would often break down due to numerical instability. Sw…

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