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In our last episode, rgearyiii wrote:
[food for thought]

I can see how you derived the expression. A few comments:

1) I would not simulate withdrawing money at the end of the year. I would withdraw it at the beginning. It is through the whole year that I'm going to need money for expenses. Waiting 'til Christmas just won't cut it with the electric company, and I live in Texas, I need my air conditioner!

2) The ratio can easily be higher than 1, so this may not be a good volatility measure after all. I noticed this when I saw the denominator of the numerator was independent of R1. If you take a hypothetical six year period in which your screen doubled the first year and never gained or lost anything after that, I think you'll find the ratio is 1.361. Perhaps addressing point 1 will result in a more appropriate ratio formula for volatility measurement, but I haven't had time to check. Give it a try!

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