Case Summary
Returns summarize the performance of an asset such as stock in a firm. The calculation for returns on stock requires careful accounting for stock splits and dividend payments. Variation in returns defines the risk of the asset and allows one to anticipate the chance for the asset to rise or fall in value. Value at risk (VaR) measures the amount that might be lost in an investment over a chosen time horizon if we rule out a fraction of the possibilities. When viewed as a time series, a sequence of returns typically has simpler structure than the underlying prices. Returns on most stocks are simple time series that can be usefully summarized by a histogram.
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