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Over a 50 year period an asset had an arithmetic return of 12.1 percent and geometric...

Over a 50 year period an asset had an arithmetic return of 12.1 percent and geometric return of 10 percent.
Musing Blume’s formula, what is your best estimate of the future annual returns over 10 years? 15 years? 25 years?


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Answer #1

Blume's Formula -

where, T = No. of forecast/ future years, N = no. of historic/ observed periods

T = 10 years

or 11.71%

T = 15 years

%

T = 25 years

or 11.07%

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