In graphs of return performance, which of the following scales is commonly used?
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A. B. C. D.B
Historical returns are often graphed using a semi-logarithmic scale, where equally-large y-axis movements correspond to equally-large percentage changes. An arithmetic scale, on the other hand, has equally-large y-axis movements corresponding to equally-large arithmetic changes. So on an arithmetic scale, the vertical movement for a price change from 100 to 110 is just as large as the vertical movement from 10,000 to 10,010. This is widely considered a distortion (if you are considering rates of return), so the semi-logarithmic scale is used instead.