The current method is taking the absolute value of all data points. This prevents any negative numbers from breaking the calculations but gives the wrong results. The method in the book when looking at annual rates of return is to convert the return to a growth factor by adding one (P39). This method will work fine unless a rate of return is greater than -1. Though this is not normally going to happen, it can happen with some derivative investments. For example, selling naked call options that have a significant spike can result in losses exceeding 100% of the portfolio size.
The current method is taking the absolute value of all data points. This prevents any negative numbers from breaking the calculations but gives the wrong results. The method in the book when looking at annual rates of return is to convert the return to a growth factor by adding one (P39). This method will work fine unless a rate of return is greater than -1. Though this is not normally going to happen, it can happen with some derivative investments. For example, selling naked call options that have a significant spike can result in losses exceeding 100% of the portfolio size.