What question did this study set out to answer?

The aim is to critique the flawed method of calculating ROI using normality assumptions and to suggest better methodologies.

March 18, 2026

Probabilistic Approaches to Return on Investment and Residual Income: A Comment.

Key Points

The aim is to critique the flawed method of calculating ROI using normality assumptions and to suggest better methodologies.
Analyzed the proposed method by Ferrara for computing ROI metrics.
Critically evaluated the application of normality assumptions in ROI calculations.
Recommended the use of the Geary transformation with standard normal values for accuracy.
Introduced Taylor series approximations for estimating mean and standard deviation.
Identified inaccuracies in the original ROI calculations based on normality.
Proposed a more reliable method involving the Geary transformation.
Demonstrated improved estimation of ROI metrics with Taylor series approximations.

Abstract

Abstract This comment demonstrates as erroneous the method Ferrara proposed for computing the mean, standard deviation, and alternative probability intervals of ROI based on normality assumptions. To develop alternative probability intervals at different levels of significance, it is necessary to recompute the Geary transformation after substituting appropriate standard normal values in the equation. To estimate the mean and standard deviation of ROI, the use of Taylor series approximations provides a justifiable methodology.

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Cite This Study

Chan et al. (Sun,) studied this question.

synapsesocial.com/papers/69ba43cb4e9516ffd37a5659 https://doi.org/https://doi.org/10.2308/tar-4496553

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