CAGR for multiple markets

[skippyjump]

I think CAGR is only applicable to a single market but what if I have three Sub-markets A, B, and C that together make up the Market Z. What parameter would be appropriate and correspond to CAGR but for the combination of the three Sub-markets. And what would the time period for Z be?

There is no other data available than what is shown in the table below.

Market_| Initial Value__| Year | Final Value | CAGR__| Year

------------|--------------------|--------|-----------------|-------------|---------

A_______|10____________| 2022 | 31_________| 14.50% | 2030

B_______| 2.7___________| 2023 | 17.4_______| 20.50% | 2033

C_______| 1.1___________| 2023 | 1.75_______| 9.60%__| 2028

Market_| Initial Value__| Year | Final Value | XXXXX__| Year

------------|--------------------|--------|-----------------|--------------|---------

Z_______|13.8__________| 20xx_ | 50.15__ ___| ??? % ___| 20xxx

The Initial and Final value for Z is the sum of those values for A, B, and C.

 

[saxophonenerd]

@skippyjump I suppose if you make the assumption that the CAGR for each market is constant over the time period and we started with weighted values, you could calculate a beginning and end value for a 'common' year and then add the markets final values over their beginning values and calculate CAGR as normal for the final value of the Z market.

Spreadsheet version of above:

https://imgur.com/a/Rv6UOxK

So like 16 ish percent?

You could also do a market cap weighted version, but i didn't go that far. Basically just weight the values by the market cap of each individual market.

if you choose different common begining/ending periods you get slightly different results (like 2023-2040 gives 16.21% CAGR, but 2023-2033 gives 16.00 percent)

Kind of meaningless because you're interpolating and extrapolating performance, which doesn't work great in the real world.

/shrug - sounds like a homework problem

Edit: it's actually the exact same if you market weight the Z portfolio - that should have been obvious to me early on (it already is market weighted hehe):

https://imgur.com/a/vqhHGdw

 

[skippyjump]

@saxophonenerd Thanks for the reply! In your image, what formulas did you use to in the cell with the value of 16.21% and what formulas did you use in column I and K?

 

[saxophonenerd]

@skippyjump Here are all the formulas:

https://imgur.com/a/v8AN1Me

 

[skippyjump]

@saxophonenerd Thanks!