Following this formula π΅π»π΄π ππ‘ = β[1 + π ππ‘] ββ [1 + πΈ(π π𝑡] using the below data
Date 19/03/2014 Price 95.65 Return 1.0054
Date 20/03/2014 Price 96.17 Return 1.0013
Date 21/03/2014 Price 96.3 Return 0.9983
the β[1 + π ππ‘] equals simply the return (1.0054*1.0013*0.9983) or is it (2.0054*2.0013*1.9983) since there is a "1+" in the equation?? I am so confused because I have seen people not adding the 1 up, just using the regular return and compounding it. Then what is the point of the "1+" in the formula?
Many thanks for your help and clarification in advance.
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