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Price-Return Index

Install and import#

bash
npm install fintech-algorithms
ts
import { calculate } from "fintech-algorithms/index-and-benchmark-engineering/return-variants/price-return-index";

Signature#

calculate(data)

Level series from price returns alone, ignoring dividends. The number most often quoted, and the one that understates long-horizon performance.

Parameters#

NameTypeNotes
data{ prices: number[]; baseLevel: number }Constituent or index prices in chronological order. baseLevel is the index value at the start of the series; it scales the level but never the returns.

Returns#

{ returns, levels, endingLevel }

Period returns, the level series, and the final level.

Errors#

  • When fewer than two prices are supplied — throws

Complexity: time O(n), space O(n).

Worked example#

verified This is the worked example published in the article, replayed by the test suite on every run. The output cannot drift.

Input#

data
{
  "prices": [100, 102, 101, 104, 103.5, 106],
  "baseLevel": 1000
}

Call#

calculate(data)

Returns#

object with 3 fields: returns, levels, endingLevel

{
  "returns": [0.02, -0.009804, 0.029703, -0.004808, 0.024155],
  "levels": [1000, 1020, 1010, 1040, 1035, 1060],
  "endingLevel": 1060
}

Diagrams#

Price-Return Index — article hero
Price-Return Index — failure guard
Price-Return Index — worked example

Calculation flow#

Price-Return Index calculation flow 
flowchart LR
    A["Point-in-time inputs"] --> B["Validate units and timing"]
    B --> C{"Contract feasible?"}
    C -->|No| D["Reject with reason"]
    C -->|Yes| E["Calculate Price-Return Index"]
    E --> F["Recompute invariants"]
    F --> G{"Checks pass?"}
    G -->|No| D
    G -->|Yes| H["Publish audited output"]
Price-Return Index methodology state 
stateDiagram-v2
    [*] --> FrozenInputs
    FrozenInputs --> Validated: contract passes
    FrozenInputs --> Rejected: missing or infeasible
    Validated --> Calculated: apply named rule
    Calculated --> Audited: invariants pass
    Calculated --> Rejected: invariant fails
    Audited --> Published: version and timestamp recorded
    Published --> Revised: approved correction
    Revised --> FrozenInputs: rebuild from retained source state

How it works#

This page states the contract — how to call it correctly. The article explains the concept: why it works, and where it breaks.

Read the article →

References#

The rest of the Return Variants family#