\frac{P_i}{P_{i-1}}\] Note that we didn't use a straightforward difference (\(P_i-P_{i-1}\)). The reason is because the difference most certainly isn't iid (a price of $1 has support on \([-1,\infty]\) whereas a price of $2 has support on \([-2,\infty]\)). You'll notice that our characterization corresponds to a percentage difference (plus one). The Normal