# Volatility drag - i

Calculus Level 3

It seems that investments with a constant rate of return $$r_0$$ end up with a different return than investments whose average rate of return is $$\langle r(t) \rangle = r_0$$. Might fluctuations in the return rate dissipates potential gains, like friction dissipates kinetic energy in physics?

Which of the following explains what's going on?

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