Time Additivity

Time additivity is a mathematical property where the total return of an investment over a multi-period horizon is equal to the sum of the returns of the individual periods. This property holds true for log returns, which makes them highly convenient for financial modeling and forecasting.

By transforming price data into log returns, analysts can aggregate performance across different time intervals without the complexities of compounding arithmetic percentages. This simplicity is vital for performing statistical analysis on large datasets of crypto prices.

It allows for the easy scaling of models from hourly to daily or monthly timeframes. Time additivity is a cornerstone of efficient quantitative financial engineering.