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Actually I was reading a blog on how to calculate the cumulating return of a stock for each day. The formula that was described in the blog to calculate cumulating return was (1 + TodayReturn) * (1 + Cumulative_Return_Of_Previous_Day) - 1 , but still I am not able to calculate the cumulative return that was provided on it.

Can someone please make this clear that how is cumulative return has been calculated in the table given below. This would be a lot of help.

Thanks in advance.

| Days  | Stock Price | Return | Cumulative Return|
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| Day 1 | 150         |        |                  |
| Day 2 | 153         | 2.00 % | 2.00 %           |
| Day 3 | 160         | 4.58 % | 6.67 %           |
| Day 4 | 163         | 1.88 % | 8.67 %           |
| Day 5 | 165         | 1.23 % | 10.00 %          |
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Nishkarsh Kumar
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  • Take day 5 for example. The `Return` is calculated as `165/163 = 1.01227`. Subtract 1 to get the increase in price, multiply by 100 to convert to a percentage, and round to 2 digits after the decimal point to get 1.23 %. The `Cumulative Return` is calculated as `165 / 150 = 1.1` which converts to 10.00 %. So the difference is that `Return` uses the previous day's price, and `Cumulative Return` uses the Day 1 price. – user3386109 Sep 17 '22 at 17:57
  • The formula in the blog is a bad idea, because it will accumulate rounding errors. – user3386109 Sep 17 '22 at 18:01

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