a vector, matrix, data frame, timeSeries or zoo object of asset returns
scale
number of periods in a year (daily scale = 252, monthly scale = 12, quarterly scale = 4)
geometric
generate geometric (TRUE) or simple (FALSE) returns, default TRUE
Value
annualized return
Details
Annualized returns are useful for comparing two assets. To do so, you must scale your observations to an annual scale by raising the compound return to the number of periods in a year, and taking the root to the number of total observations:
$$prod(1+R_{a})^{\frac{scale}{n}}-1=\sqrt[n]{prod(1+R_{a})^{scale}}-1$$
where scale is the number of periods in a year, and n is the total number of periods for which you have observations.
For simple returns (geometric=FALSE), the formula is:
$$\overline{R_{a}} \cdot scale$$
References
Bacon, Carl. Practical Portfolio Performance Measurement and Attribution. Wiley. 2004. p. 6