Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/84246
Authors: 
Apreda, Rodolfo
Year of Publication: 
2011
Series/Report no.: 
Serie Documentos de Trabajo, Universidad del CEMA: Área: finanzas 454
Abstract: 
This paper puts forward an alternative approach to multiplicative models and their assessment of returns out of financial assets. Firstly, it lays down an operative definition but also sets forth a commutative framework of mappings to provide foundations to such a definition. Next, the total return is split down into its linear and non-linear building blocks. Afterwards, a compatibility lemma draws a distinction between what should be meant by linear approximation and linear equivalence to the multiplicative model. Last of all, three empirical examples bring home how to profit from multiplicative models in actual practice.
Subjects: 
multiplicative models of returns
additive models of return
financial assets returns
linear approximation and linear equivalences
JEL: 
G11
G12
G17
G30
ISBN: 
978-987-1062-65-2
Document Type: 
Working Paper

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