I just need to make sure that I am using the correct formula:Lets say I have a time series data of daily returns, then in order to calculate the geometric compounded return I am using the following formula:[CumProduct ( 1 + ri)] - 1 where i = 1 to nIf I want to annualize it, then i multiply [CumProduct ( 1 + ri)] - 1 where i = 1 to n by SQRT(252). Everything fine so far. If I want an average monthly number, I multiply [CumProduct ( 1 + ri)] - 1 where i = 1 to n by SQRT(21) assuming 21 trading days in a month. Is that the correct formula to get an estimate of the average monthly return?I got a risk analysis software and the manuals show that the monthly number is obtained by multiplying by SQRT(12) instead of SQRT(21)

thats as year can be thought of as 12 months... or that software is doing palindromic flipping, kidding!

what's sqrt(21)? and why do u do it to get monthly return? it doesnt make any sense to me.if sqrt(12) is the the same as x^(1/12), then it's the right thing to do to get monthly return from annual return, assuming 30/360.

Thanks for the feedback guys. I figured it out. The software takes monthly returns as the input. Jawabean - you are right as well about I have to do something like "x^(1/12)" along these lines