Compound Annual Return

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Related to Cumulative Annual Return: Average Annual Return

Compound Annual Return

Compound Annual Return

The average year-on-year growth rate of an investment over a number of years. While investments usually do not grow at a constant rate, the compound annual return smoothes out returns by assuming constant growth. This makes accounting for the investment tidier. It is calculated as:

Compound annual return = (Ending Value / Beginning Value)^((1 / n) - 1) where n is the length of time of the investment in years. It is also called the compound annual growth rate. See also: Average Annual Growth Rate.
References in periodicals archive ?
Table 2 provides another view of the results in the form of cumulative annual returns for the three portfolios.
size- and industry matched peers Dates ESOP Peers p-value 3/24/1998-3/23/1999 -0.000220 -0.000204 0.99 3/25/1999-3/24/2000 0.000929 0.001498 0.03 3/27/2000-3/23/2001 0.000602 0.000726 0.71 3/26/2001-3/22/2002 0.001393 0.001132 0.31 3/25/2002-3/24/2003 -0.000603 -0.000724 0.65 Table 2: Cumulative Annual Returns Dates ESOP Peers SPX 3/24/1998-3/23/1999 -6.88% -6.49% 14.74% 3/25/1999-3/24/2000 25.62% 45.17% 20.41% 3/27/2000-3/23/2001 14.68% 17.78% -25.38% 3/26/2001-3/22/2002 38.80% 29.67% 0.78% 3/25/2002-3/24/2003 -16.39% -19.01% -24.76%